What Is Better For You And Your Financial Goals? Equity Growth Or Passive Income?

What Is Better For You And Your Financial Goals? Equity Growth Or Passive Income?

As an investor it’s important for you to analyse the reasons why you’re looking to invest.

You want your property portfolio help you achieve your personal, professional and lifestyle goals…

It’s important to ask yourself:

  • What are your financial and lifestyle goals?
  • Are you looking to invest for the long-term, or are you more interested in making short-term gains?
  • Does equity growth or passive income best suit your goals?

As an investor you need to find a balance between what’s important to you right now with what’s important to you over the long term.

Equity Growth

Why invest in long term gains?

After the crazy growth we’ve seen in the major capital cities around Australia, including Sydney and Melbourne, it is hard not to be pulled towards the idea of capital growth.

The idea of buying a property in a high growth area and flipping it in a few short years to earn, say, $100,000 sounds very appealing.

The problem with capital growth is that it is never certain. Sources such as Residex, Matusik, RP Data, Your Investment Property and Australian Property Investor can help point you in the right direction but capital growth is never linear.

Often investors trade capital growth, for income, resulting in negatively geared portfolios which can affect their ability to continue purchasing property in the future.

This strategy relies on you continuing to earn an income, so that you can make repayments on your property in the hope that at some time down the track the property will increase in value.

When thinking about your lifestyle goals and what it its that you love doing, it is important to understand that a negatively geared investment property can take a toll on the life you want to lead…in the short term.

Passive Income

Why invest in short term gains?

Investing in property with a high rental yield and a passive income source is a safer long-term option. A positively geared property won’t mean you can quit your job tomorrow and make millions from your property portfolio, but it does mean that you have more options when it comes to your lifestyle needs.

If an investment is positively geared, or at worst, neutrally geared, it is essentially paying for itself, which puts less pressure on you to service your investment properties on a week-to-week basis.

This investment option gives you more flexibility to make decisions around what you do for work, travel and family in the future.

For example:

Lets say you own 5 investment properties, and 3 of those were positively geared, each returning a passive income of $5,000 per year…

While $15,000 may not seem like a lot of money its $15,000 a year that you never have to work for again which can be used for travel, investment or to reduce the amount of hours you work.

Which option is best for you?

Everyone is different.

To build a balanced portfolio it’s smart to buy properties with high capital growth potential as well as properties that are positively geared which inject passive income into your investment portfolio.

By combining both investment options you can begin to create a contingency plan if one suburb is not performing as well as predicted, or if rental yield begins to drop and vacancy rates rise.

The option that best suits you is the option that aligns with your lifestyle goals as well as your financial goals.

For people looking to create long-term wealth capital growth should appeal to you as an investor.

For those of you who are looking for flexibility with your career and the ability to replace a chunk of your annual income, passive income will be more important.

Ask yourself again – Equity Growth or Passive Income?

The answer should be BOTH…


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Ben Everingham


Ben founded Pumped On Property after building a multi-million dollar property portfolio over a 5 year period. His mission is to show you how to replace your income through property investing so you can do what you love…full time.