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EPI157 | Residential Investment Strategies – Buy and Hold for Capital Growth
MP3•Episode home
Manage episode 361149444 series 8124
Content provided by Kaz Young | Property Investing and Real estate investment education and advice, Kaz Young | Property Investing, and Real estate investment education. All podcast content including episodes, graphics, and podcast descriptions are uploaded and provided directly by Kaz Young | Property Investing and Real estate investment education and advice, Kaz Young | Property Investing, and Real estate investment education or their podcast platform partner. If you believe someone is using your copyrighted work without your permission, you can follow the process outlined here https://player.fm/legal.
Property Investing Strategy – Part 2
Buy and Hold for Capital Growth
- Aim is to hold property that grows in value over time
- Example
- Property purchased in Sep 2019 for clients in Cannon Hill, Brisbane
- Purchase price $730,000
- Rental yield was approx 4.4% (based on 100%LVR) so would have been negatively geared
- No renovations or alterations undertaken
- Current estimated value is $1.1m
- $370,000 increase in value (50%) in 3 years
- Timing here was very fortunate as purchased just a couple of years prior to huge growth cycle
- Expectations around growth – what is realistic, what is good? This example is not indicative of every purchase.
- Aiming for areas that have high capital growth
- Often negatively geared
Why use this strategy?
- Access equity to purchase another investment
- Rent- investors can sell to help them buy an upgraded home they could otherwise afford
- Park money and earn more than you might if you left money in the bank
- The biggest reason is to build wealth to support or supplement retirement.
- 3 ways to do that
- Build equity sell some down
- Pay off some and live off of rental income (?difficult)
- Sell all and put funds into another investment vehicle that supports retirement
- 3 ways to do that
- Financial planners want to see $1.2 million nett in cash for retirement if your aim is to earn circa $60K pa in retirement
How is high growth buy and hold achieved
- Comes down to area selection
- Asset selection
- Meeting the growth fundamentals for the type of property you are purchasing.
- Criteria for a house will be different to a townhouse, apartments etc
How to maximise asset selection for growth
Location
- Infrastructure projects – transport, healthcare, university, community facilities, large shopping chains (e.g. bunnings)
- Transport corridors
- School catchments
- Population growth
- Shopping precincts closeby
- Ripple suburbs – income growth, gentrification, cafe culture
- Historic Growth – discuss
- Water
Property
- Features that suit the demographic
- Land size
- Yard
- Kitchen
- Outdoor entertaining
- Good floorplan
- Light and bright
- Low maintenance – flat block, simple garden
- Well maintained
- Owner occupier and rental appeal
Pros and Cons of this strategy – buy and hold for Capital Growth
- Pros
- Builds wealth
- With a big upswing in growth can make a lot of money
- Losses offset taxable income
- Capital growth has a compounding effect, so the sooner you get into the market the more gains you will enjoy
- Excellent passive strategy (Less moving parts. Less project mgt)
- Accessible to most people (ie – developing might not be for some people, whereas this is)
- Types of properties and areas that are typical for this strategy are usually acceptable by banks with 90-95% LVRS often possible depending on the individuals circumstances
- If held long enough, very forgiving
- Lower risk (when fundamentals followed) than other strategies
- SMSF friendly
- Cons
- Losing money so need to be able to sustain that (ie require spare cash to be able to cover the shortfall between the rent and outgoings)
- Limited capacity to repeat depending on available disposable income
- Interest rate hikes can make holding properties difficult
- Forecast growth is not guaranteed, based on speculation
What’s next
In the upcoming episode we’ll look at positive cashflow property.
The post EPI157 | Residential Investment Strategies – Buy and Hold for Capital Growth appeared first on Everyday Property Investing.
29 episodes
MP3•Episode home
Manage episode 361149444 series 8124
Content provided by Kaz Young | Property Investing and Real estate investment education and advice, Kaz Young | Property Investing, and Real estate investment education. All podcast content including episodes, graphics, and podcast descriptions are uploaded and provided directly by Kaz Young | Property Investing and Real estate investment education and advice, Kaz Young | Property Investing, and Real estate investment education or their podcast platform partner. If you believe someone is using your copyrighted work without your permission, you can follow the process outlined here https://player.fm/legal.
Property Investing Strategy – Part 2
Buy and Hold for Capital Growth
- Aim is to hold property that grows in value over time
- Example
- Property purchased in Sep 2019 for clients in Cannon Hill, Brisbane
- Purchase price $730,000
- Rental yield was approx 4.4% (based on 100%LVR) so would have been negatively geared
- No renovations or alterations undertaken
- Current estimated value is $1.1m
- $370,000 increase in value (50%) in 3 years
- Timing here was very fortunate as purchased just a couple of years prior to huge growth cycle
- Expectations around growth – what is realistic, what is good? This example is not indicative of every purchase.
- Aiming for areas that have high capital growth
- Often negatively geared
Why use this strategy?
- Access equity to purchase another investment
- Rent- investors can sell to help them buy an upgraded home they could otherwise afford
- Park money and earn more than you might if you left money in the bank
- The biggest reason is to build wealth to support or supplement retirement.
- 3 ways to do that
- Build equity sell some down
- Pay off some and live off of rental income (?difficult)
- Sell all and put funds into another investment vehicle that supports retirement
- 3 ways to do that
- Financial planners want to see $1.2 million nett in cash for retirement if your aim is to earn circa $60K pa in retirement
How is high growth buy and hold achieved
- Comes down to area selection
- Asset selection
- Meeting the growth fundamentals for the type of property you are purchasing.
- Criteria for a house will be different to a townhouse, apartments etc
How to maximise asset selection for growth
Location
- Infrastructure projects – transport, healthcare, university, community facilities, large shopping chains (e.g. bunnings)
- Transport corridors
- School catchments
- Population growth
- Shopping precincts closeby
- Ripple suburbs – income growth, gentrification, cafe culture
- Historic Growth – discuss
- Water
Property
- Features that suit the demographic
- Land size
- Yard
- Kitchen
- Outdoor entertaining
- Good floorplan
- Light and bright
- Low maintenance – flat block, simple garden
- Well maintained
- Owner occupier and rental appeal
Pros and Cons of this strategy – buy and hold for Capital Growth
- Pros
- Builds wealth
- With a big upswing in growth can make a lot of money
- Losses offset taxable income
- Capital growth has a compounding effect, so the sooner you get into the market the more gains you will enjoy
- Excellent passive strategy (Less moving parts. Less project mgt)
- Accessible to most people (ie – developing might not be for some people, whereas this is)
- Types of properties and areas that are typical for this strategy are usually acceptable by banks with 90-95% LVRS often possible depending on the individuals circumstances
- If held long enough, very forgiving
- Lower risk (when fundamentals followed) than other strategies
- SMSF friendly
- Cons
- Losing money so need to be able to sustain that (ie require spare cash to be able to cover the shortfall between the rent and outgoings)
- Limited capacity to repeat depending on available disposable income
- Interest rate hikes can make holding properties difficult
- Forecast growth is not guaranteed, based on speculation
What’s next
In the upcoming episode we’ll look at positive cashflow property.
The post EPI157 | Residential Investment Strategies – Buy and Hold for Capital Growth appeared first on Everyday Property Investing.
29 episodes
All episodes
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