This is known as cashflowing and is a common part of investment strategy in rapidly rising markets, especially in the early investment years.
But this makes cashflow highly important – you will want to optimise it, even if it is negative initially.
In the UK market at the time of writing we are entering a period of slower capital growth and yields are compressed – some regions have been in this phase for a while now. In this situation, a small increase in yield equals a big impact on profits.
You can’t do a lot about cap growth if you’re already invested, but you can have an impact on a yield.
High capital growth means frequent refinancing and repurchase.
Conversely, weak capital growth means refinancing is restricted and an investor will instead look towards:
(i) Security
(ii) Future refinancing
Yield is therefore much more important, which means active management is vital.
With thanks to BuyAssociation.
