In talks to similarly minded (property wise) friends, one thing I often mention is property prices from 30 years ago.
Along the lines, Perth house costs were about $15,000 about 30 years ago. What if they'd bought a few places then? The properties would now be each worth around $200,000 - the approx current median house price.
That leads straight into, well, what about in another 30 years? What are they going to do now so that in 2033 they can look back and say that houses in 2003 were only $200,000 and we bought a few. By then, house prices might be $3,000,000.
So I just threw some numbers in a spreadsheet - see attached.
For the exercise, have assumed 10% annual capital growth. Starting point at $1,000,000 portfolio value, $500,000 equity and hence LVR 50%.
The calculations assume additional property investment every year sticking to the modest (?) overall LVR of 50%. Borrowings of 106% for new purchases.
In 30 years, the portfolio value has grown to a staggering 180 million. The next year equity exceeds 100 million dollars! Within a further 10 years the portfolio value exceeds one billion dollars. Debt is of course half that value!
The power of compounding.
Are there are some browsing the forum in 2003 who will one day have a billion dollars of property? Could it be you?
Along the lines, Perth house costs were about $15,000 about 30 years ago. What if they'd bought a few places then? The properties would now be each worth around $200,000 - the approx current median house price.
That leads straight into, well, what about in another 30 years? What are they going to do now so that in 2033 they can look back and say that houses in 2003 were only $200,000 and we bought a few. By then, house prices might be $3,000,000.
So I just threw some numbers in a spreadsheet - see attached.
For the exercise, have assumed 10% annual capital growth. Starting point at $1,000,000 portfolio value, $500,000 equity and hence LVR 50%.
The calculations assume additional property investment every year sticking to the modest (?) overall LVR of 50%. Borrowings of 106% for new purchases.
In 30 years, the portfolio value has grown to a staggering 180 million. The next year equity exceeds 100 million dollars! Within a further 10 years the portfolio value exceeds one billion dollars. Debt is of course half that value!
The power of compounding.
Are there are some browsing the forum in 2003 who will one day have a billion dollars of property? Could it be you?
