Cashflow vs. Capital Gains, the big question for 2025 is no longer “which one matters more?” but “how can investors achieve both?” This week we sat down with Ilse Wolfe Director of Wolfe Property, a specialist in cashflow hacking and multi-unit renovations to unpack how investors are balancing income and long-term growth in the year ahead. As rates fall and confidence returns, Ilse explains why the old belief that you must choose between cashflow or capital gains is rapidly dissolving.
The Return of Confidence And Why Cashflow vs. Capital Gains Matters Again
This year has seen a real shift in sentiment. Investors who stayed active through the tougher market conditions are now accelerating – and Ilse confirms that every new investor she speaks with is focused on cashflow. After several years of topping up negatively geared properties, the appetite for neutral or positive returns has skyrocketed.
And with interest rates easing and prices unlikely to get cheaper, the perfect mix of confidence, borrowing capacity, and opportunity is back. That’s why the discussion around cashflow vs. capital gains has kicked up again because investors want both income now and wealth later.
But, as Ilse points out, you don’t need to choose. With the right buying strategy and the right renovation plan, you can engineer both outcomes inside a single asset.
How 2025’s Market Conditions Shape Investment Decisions
Even with talk of capital gains tax and debate over long-term growth rates, the fundamentals haven’t changed:
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Capital gains build wealth over time.
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Cashflow improves lifestyle and holding power.
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Long-term ownership is what crystallises gains.
Rates coming down means investors are already seeing cash “returned to pockets” from improved yields something that simply wasn’t happening over the last two years. And despite speculation from economists that future growth may sit around 3%, others believe a 5% long-term average is more realistic once population growth and improved economic conditions settle.
Meanwhile, the rental market has softened in some regions, with drops of $50–$75 per week this year. That’s forced investors to rethink assumptions and be conservative with vacancy rates – another reason cashflow is becoming the foundation of every analysis.
This environment makes cashflow & capital gains a strategic balance, not a trade-off.
Case Study 1: Turning a $420K Existing Home into a $650K Asset
Ilse’s first example shows exactly how both outcomes can be achieved.
A couple bought a standalone home in New Plymouth for $420,000 – an estate sale where the beneficiaries simply wanted the cash. They went in unconditional, completed all due diligence upfront, and acted quickly. What followed was a smart value-add strategy: repainting the exterior themselves, reconfiguring quirky existing add-ons into a true 4-bedroom, 1.5-bath layout, and ensuring the home appealed to long-term family tenants (including an oversized shower for the parent appeal).
Total spend: $70,000
All-in cost: $490,000
New registered valuation: $650,000
Six weeks after completing the renovation, the uplift was so strong that the usable equity fully funded the deposit and renovation of their next duplex – effectively turning one project into two.
This is the perfect illustration of how cashflow vs. capital gains isn’t either/or.
A well-designed renovation created strong income potential and a sizable equity jump.
Case Study 2: Making $500,000 in Equity Through Multi-Units
he second case study shows the power of scale.
A client purchased a block of six two-bedroom units for $1.35 million. Despite being high-end builders themselves, they struggled to make deals stack until they partnered with Ilse’s structured approach – stripping out unnecessary “owner-occupier” thinking and sticking firmly to investor-grade specifications.
The block had enormous potential:
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Direct vendor who was out of touch with market rents.
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Non-compliant merged units that could be legally restored.
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Significant value-add opportunities through cosmetic upgrades, kitchens, and a new roof.
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Strong rental demand from professionals wanting walkability.
Renovation spend: $350,000
Total cost: $1.7 million
After providing a refined set of comparable sales data to the valuer, the final valuation came back at $2.2 million – a $500,000 uplift.
Post-tax cashflow in year one: $40,000.
The result?
Cashflow and capital gains at a scale that accelerates portfolio growth.
Why Experience Compounds Faster Than Equity
One of Ilse’s key insights: an investor’s knowledge doubles after completing just one project.
Clients who finish their first value-add deal often return for their second within months – more confident, more decisive, and far more efficient. They quickly learn how to use cashflow to support borrowing capacity and how to use capital gains to fund the next acquisition.
In 2025, this compounding of skill is as important as compounding of returns.
Key Takeaways
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Investors in 2025 are shifting heavily toward cashflow while still pursuing strategic capital gains.
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Falling interest rates and rising confidence are creating ideal conditions for value-add projects.
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You don’t need to choose between cashflow vs. capital gains – well-designed renovations can deliver both.
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Estate sales, off-market deals, and multi-units offer some of the strongest uplift opportunities.
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Rental softness this year highlights the importance of conservative vacancy assumptions.
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Multi-unit blocks can produce substantial equity growth and strong passive income.
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Partnering with the right valuation, lending, and renovation teams is critical for maximising results.
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Investor confidence typically rises after summer, increasing competition – acting early matters.
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Knowledge from one project dramatically improves speed and accuracy on the next deal.
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Long-term strategy still beats short-term reactions to political or economic noise.
Next Steps
If you want to explore which strategy cashflow, capital gains, or a combination best fits your financial plan, our Lighthouse mortgage team can walk you through your options and the lending required to get started. Learn more about Wolfe Property here
If you’d like to learn more, check out these other episodes below.
For a no obligation discussion to see how we can help you on the path to wealth, please contact us.
Disclaimer:
The information in this article is general information only, is provided free of charge and does not constitute professional advice. We try to keep the information up to date. However, to the fullest extent permitted by law, we disclaim all warranties, express or implied, in relation to this article – including (without limitation) warranties as to accuracy, completeness and fitness for any particular purpose. Please seek independent advice before acting on any information in this article.
