Reading through a Terry Ryder report recently on which types of suburbs to invest in I concluded the following that you can follow 1 of 3 methods available:
1) "Slow" method: With very little knowledge, if you invest in a well-located suburb in a regional/capital city, then you could obtain 6-9% p.a. capital gain returns (ie. rule of 72: basically your IP will double every 10-12 years);
2) "Average" method: With more knowledge, if you invest in the proven "blue-chip" suburbs in a regional/capital city, then you could obtain 10-14% p.a. capital gain returns (ie. rule of 72: basically your IP will double every 7-10 years);
or...
3) "Get Rich Quick" method: With more specific & well-researched knowledge, if you invest in the "Hot Spot" suburbs in a regional/capital city (ie. "ugly duckling" suburbs that are waiting to be "discovered"/gentrified/urban renewal/discovery of a mine, etc etc), then you could obtain 15-30%+ capital gain returns (ie. rule of 72: basically your IP will double every 4-6 years)
So, herein lies the question: Which category do you invest in? Or is it a mix of 2 & 3 or all 3 categories?
I personally have invested so far in category 2 "in my own backyard" as I knew the market fairly well & bought undermarket.
The reason why I classify the 3rd category as "Get Rich Quick" is that it appears that if those IPs are coming off a low $$$base & therefore get "discovered" & rise rapidly then if you timed your purchase well then you could profit from massive capital gains very fast over a 4-6 year period. Duplicating this scenario each time you buy (say 1 IP purchase each year) would grow your portfolio very quickly over a 10 year period.
The only issue I have with category 3 is that while your IP may double or triple in 7-10 years with 15-30% p.a. capital gain returns, I doubt the same suburb is going to enjoy the same high capital gain returns over the 11-20 year period & above.
I liken it albeit to horse racing...bet on the favourite at short odds & there's a very good chance it'll win or be in the top 3 (category 2) or try to back a long-odds horse at 30:1 or 50:1 & 8 out of 10 times it won't make the top 3 or 5 finish, but if it does win, you've won big. Categories 1 or 2 seems like the safe bet.
Thoughts???
1) "Slow" method: With very little knowledge, if you invest in a well-located suburb in a regional/capital city, then you could obtain 6-9% p.a. capital gain returns (ie. rule of 72: basically your IP will double every 10-12 years);
2) "Average" method: With more knowledge, if you invest in the proven "blue-chip" suburbs in a regional/capital city, then you could obtain 10-14% p.a. capital gain returns (ie. rule of 72: basically your IP will double every 7-10 years);
or...
3) "Get Rich Quick" method: With more specific & well-researched knowledge, if you invest in the "Hot Spot" suburbs in a regional/capital city (ie. "ugly duckling" suburbs that are waiting to be "discovered"/gentrified/urban renewal/discovery of a mine, etc etc), then you could obtain 15-30%+ capital gain returns (ie. rule of 72: basically your IP will double every 4-6 years)
So, herein lies the question: Which category do you invest in? Or is it a mix of 2 & 3 or all 3 categories?
I personally have invested so far in category 2 "in my own backyard" as I knew the market fairly well & bought undermarket.
The reason why I classify the 3rd category as "Get Rich Quick" is that it appears that if those IPs are coming off a low $$$base & therefore get "discovered" & rise rapidly then if you timed your purchase well then you could profit from massive capital gains very fast over a 4-6 year period. Duplicating this scenario each time you buy (say 1 IP purchase each year) would grow your portfolio very quickly over a 10 year period.
The only issue I have with category 3 is that while your IP may double or triple in 7-10 years with 15-30% p.a. capital gain returns, I doubt the same suburb is going to enjoy the same high capital gain returns over the 11-20 year period & above.
I liken it albeit to horse racing...bet on the favourite at short odds & there's a very good chance it'll win or be in the top 3 (category 2) or try to back a long-odds horse at 30:1 or 50:1 & 8 out of 10 times it won't make the top 3 or 5 finish, but if it does win, you've won big. Categories 1 or 2 seems like the safe bet.
Thoughts???