“Should property investment be about rental income or capital gains? And will that change as I age?”

We’re talking property, so we’re talking fences. Here’s a general rule for Generation X and property investment: If it doesn’t have a fence, then steer clear of it.

Capital gains and rental income are a trade off with property investment, just like shares. And Gen Xers should aim more for capital gains than income. More “BHP” property than “Telstra” property, as it were.

Capital gains in property are largely determined by land. The closer the land is to the centre of town and the more of it you have, the more likely that appreciation will be achieved over time.

Rental income is yield – the annual rent divided by the property’s value, expressed as a percentage.

Rental yields tend to be higher when there’s little land value attached, such as inner-city high-rise flats and outer-suburban properties.

Because Gen Xers will generally borrow heavily to purchase property, yield should be a secondary consideration to the property increasing in value (capital gains).

Most geared property will be negatively geared initially, which may also have some tax benefits for those in their prime earning years.

Over time, rents will grow, eventually making the property neutrally and then positively geared.

And yes, the focus should change as you age, the same as with all investing. The older you get, the more you want to replace your working income with passive income. Over time, yield will become more important than capital gains.

Bruce Brammall is managing director of Bruce Brammall Financial. E: bruce@brucebrammallfinancial.com.au . Bruce’s new book, Mortgages Made Easy, is available now.