[THE VAULT] PROPERTY MAKES $100,000 CAPITAL GROWTH IN 2016
This bank repossession deal was snapped up at auction for just $220,000 in July 2015.
Almost one and a half years later, in November 2016, it is worth around $330,000.
ITS FEATURES MAKE IT A GOOD FOUNDATION PORTFOLIO PROPERTY
This Gold Coast townhouse was built circa 2000, making it modern with depreciation attached.
In the last 18 months, the purchaser has made around $100,000 in capital value.
Renting out for around $350 to $360 per week, the property also offers a good cash flow.
THE PURCHASER WAS NO VIRGIN INVESTOR
This was not the first property we purchased on behalf of this client. In fact, the purchaser is one of the 0.001% of Australians who own six or more investment properties.
When the client first met with Nathan, it was clear he only wanted to buy positive cash flow properties. Nathan explained that due to the client’s position, this would not be possible.
Instead, he explained, it would be necessary to purchase a mixture of different properties in order to achieve the right portfolio balance between cash flow and capital growth.
Cash flow on it’s own won’t give you financial freedom. Capital growth is what will get you there, cash flow is the means to support the properties needed to generate that capital growth.
HE WENT ON TO MAKE $800,000 ON ONE PROPERTY
Nathan says, around three years ago this client purchased a slightly negatively geared property through. The property was featured in a previous episode of the Vault.
This was not a property purchased purely as a tax concession. Rather, it was purchased in order to strike a good balance in the client’s portfolio and deliver excellent capital growth.
Located in one of Sydney’s most expensive suburbs, the property was purchased for around $620,000 at a time when comparable sales were around $800,000.
The most recent appraisal conducted for a comparable property came in at $1.4 million.
THERE IS NO CLEAR CUT TEMPLATE FOR THE ‘RIGHT’ PROPERTY
While some people think buying with depreciation or positive cash flow is the ‘right’ way to go about investing, Nathan says, it is not always so clear cut.
While it is important to purchase at the right price, with a good upside for growth and a strong cash flow, the overall strategy is the most important thing to consider when building an asset base.
A well thought-out strategy will allow you to see what type of property will go well in your portfolio, and what type won’t – whether it is modern or old, positive, neutral or slightly negative.
Having clarity on your goals and a vision of where you are heading will allow you to stay focused on this strategy. This will enable you to buy in line with what you would like to achieve, and avoid purchasing on emotions.
Have you purchased negatively geared properties in order to strike the right balance? Please share your experiences in the comments section below.