Boom boom boom
Last week I had the absolute pleasure of delivering the message to over 800 clients that they had all made at least $200,000 - $350,000 in 5-8 years. Majority of the properties were in Melbourne with some getting it off the back end of the Sydney cycle that continues in the outer suburbs.
Truganina, Tarneit and Deer Park have seen over $200,000 in growth, some saw +$300,000, and Melton, Brookfield and Sunbury just under $200,000.
Clients bought land in Truganina for $110,000 and those blocks alone grew by $100,000 in the last 6-12 months. Clients bought land for $295 per m2 that now sells for $1,000 per m2. Land appreciates…..you know the rest.
We did the numbers and one of our top clients has been making at least $370,000p.a. in capital growth in this cycle. He is making this kind of money because he kept buying whenever he could. Our best performing clients have been the ones that continue to buy to make sure they aren’t missing growth in other areas.
And yes I hear you when is Brisbane going to kick in? Well, of the 85 suburbs we have property in, more than half have achieved at least a +30% increase in house prices and ALL have seen more than 30% of land growth per m2. Brisbane median is currently 52% of Sydney. Expect this to correct to 70-80% in the next 2-4 years. Take a leaf out of our best performing clients and buy again when you can.
Here’s A Reminder of Mistakes in Property
If you borrow money as most investors do, cash flow is the biggest mistake you can make - ‘cash is like oxygen, if you run out of it, it will be over for you very quickly’ as my mentors drilled into me.
However over time the biggest mistake you will ever make is selling. And yet that’s what 50% of investors do in the first 5-10 years of buying an investment property.
The top 3 mistakes investors make other than cash flow are;
2. Land content
Time has proven that the median house price has increased in value by 8% per annum compound over the last 40+ years across the five capital cities. I grew up in Melbourne where the median house price in 1968 was $11,200, 1978 was $37,600, in 1988 was $114,000, 1998 was $198,000 , 2008 was $451,000 and today is a massive $828,720.
Land content is the percentage of your purchase price represented by the land value. I aim for 40%-50% of my purchase price in the land value, that’s why I would never buy an apartment as 50% of investors do.
One of our clients bought a 1,000m2 block of land in Pimpama, in the Brisbane-Gold Coast corridor with a 4 bedroom house. He paid a total of $174,000. The land value was $66,000 or $66 per m2. He bought it back then with just 5% deposit or total $10,000 including fees. He still owns that property. Today it’s worth around $660,000 as land alone sells for $660 per m2 for 375m2 lots.
If you want to use property to build your wealth growth should be your number 1 focus and the best performing growth will be land in minimum 5% per annum proven population growth areas close to the capital cities. The numbers tell the story that 78% of the population growth and 87% of job growth is in the capital cities. To super charge your growth you want compound growth which means using that first property to leverage and buy more when it grows. To do that you need reliable cash flow.