Capital growth strategy

A capital growth investment strategy is where a property is purchased that is expected to produce above-average increases in property value over time.

These properties often have a higher purchase price and lower rental yield. This is referred to as negatively geared, which means the annual cost of your investment is more than the investment property rate of return.

This strategy has 2 advantages:

In some countries tax benefits or deductions may be claimed for some of the out-of-pocket expenses or losses. Some countries, such as the UK has stopped allowing this and other may follow

The other advantage is that as your investment property value increases you may be able to draw out equity or borrow against it to expand your investment property portfolio.

These properties are typically found in capital cities, major regional centers or areas under development. They often come at a premium and require you to dip into your savings to cover mortgage costs.