There seems to be one thing in this debate that has been overlooked in this post in the ongoing cap growth / cash flow debate.
That is as the property cycle moves , different styles of property move at different times.
Typical high growth areas move first , THEN the typical cash flow growth areas move afterwards. Personally I wouldn't buy a cash flow property unless I felt it was going to increase in value unless it was returning something like 20 %.
My plan for the next ten years invloves something like this.
We are in the process of planning a Dual Occ on our PPOR.
Once we finish it ( assuming it gets through council), if the market is still reasonable we will sell the current house and move into the new house. This will give us a mortgage free PPOR and hopefully some money in the bank. If we can't sell the house for a reasonable price we will sell the house into a trust fund , refinancing it.
We will then spend some money and time improving the IP's we have bought in Logan and Hobart in order to increase the rental returns and improve the type of tenants in these properties. At some stage we will also refinance these properties so we will have some equity available to make more purchases within the trusts that hold these.
At this stage ( and in the mean time ) I will be keeping a close eye on the stock market. There will come a time when this will be a good place to get good returns , but I think now is too early.
Again depending on what the market is like we may repeat our current strategy of buying a PPOR to do a subdivision / dual occ, but this is more disruptive to family life.
If we don't do that we will be looking for the "deal of the decade" in terms of buying something undervalued in sydney or central coast ( close to home ) that gives us the option of increasing our equity by renovating or redeveloping. This will need to be a special deal , and if I see that the market is moving down I would be happy to watch from the sidelines for a while. We are looking at changing direction in our work lives and this might be the time to do that if IP opportunities are not obvious.
But anyway I anticipate that in the next five years we will be buying in good areas in sydney with the aim of buying close to the bottom of the next property cycle. As these properties start increasing in value I plan to draw out equity and use this to buy in the middle / outer ring areas of sydney. We will have plenty of time to reaseach which areas will be the areas that are more likely to undergo gentrification , but the areas in sydney I have the most knolwedge about are the north shore, northern beaches, and inner west , out to concord.
As these areas move I will repeat the process of drawing down equity and put it into the traditional cash flow areas of sydney such as Mt Druitt. Once these arrears takes off I'll be back up to brisbane looking to buy in cash flow areas up there to take advantage of the Capital Growth that this area will once again experience.
At this stage I don't know how active I will be in getting involved in developments but this is an option that I will keep open , and depending on finances , it is something I may do full time for a few years.
In about ten years time I plan to be living in a waterfront house backing onto Pittwater with a recoding studio looking out over the boats tied up at the end of Jetty. Bronte will be visiting with her parents just having had her tenth birthday and I'll have a Grammy award on the Mantle place over the open fire
see change
