What is an acceptable capital growth?

[tourist]

I bought my first IP 14 years ago when I knew very little about investing but I realised that I needed cash flow or we would struggle to pay for it on our low income. Looking back I am averaging around 8% capital growth which I don't think is too bad considering my complete ignorance at the time.

I still have a lot to learn but now I realise how import capital growth is and I expect a minimum of 10% long term for my latest IP.

What do others think should be the minimum capital growth? Perhaps I should consider selling the older properties to free up funds to purchase higher capital growth properties.

 

[alexlee]

I still have a lot to learn but now I realise how import capital growth is and I expect a minimum of 10% long term for my latest IP.

What do others think should be the minimum capital growth? Perhaps I should consider selling the older properties to free up funds to purchase higher capital growth properties.

1) How do you know you'll be able to get 10%+ for your latest IP and
2) When you you decide that it's not enough? If you get 10 years of 8%, do you write the thing off and say you had a crap investment?
Alex

 

[Rixter]

What do others think should be the minimum capital growth? Perhaps I should consider selling the older properties to free up funds to purchase higher capital growth properties.

I work my portfolio figures from a conservative 7% capital growth. Using rule of 72 I want my property to double in value every 10 years or sooner.

 

[tourist]

1) How do you know you'll be able to get 10%+ for your latest IP and
2) When you you decide that it's not enough? If you get 10 years of 8%, do you write the thing off and say you had a crap investment?
Alex

I really wondering what others are aiming for. I have learnt the hard way not to sell properties without good reason but that doesn't mean I shouldn't ask myself the question at times.

I may not get my 10%+ but I can aim for it. I might enter 7% in my spreadsheet for conservative planning but when I purchase I look for a property that should bring more than 7%. I knew when I bought my first IP that properties in other suburbs would increase in value more than the suburb I was purchasing in but I couldn't afford the low yield.

 

[cgw]

Between 7% and 10%, how would you really know, unless you did sell it?

 

[GIDDO]

I am only allowing 5% when I do my spreadsheets.
Am I too conservative?

 

[marg4000]

I would say if you have averaged 8% over 14 years you have done very well.
Marg

 

[redsquash]

Posting a poll will get you more input.
I am content with 10% CG, which is very different from return on equity.

 

[buzzlightyear]

How about 200%?

In the process of doing a renovation and based on figures at the moment, for every $1 I will spend, I will add $3 to the value of the property.

Why restrain yourself to the rate which the market is advancing, be that 5%, 8%, 10% or even 20%?

 

[Sunfish]

I would say if you have averaged 8% over 14 years you have done very well.
Marg

I don't have the necessary charts for the Gold Coast (Don't have them for "anywhere" ) but if you were CF+ve when you bought, (there ware a lot like that, then) you should be happy. But if you have been pumping some of your hard earned into it each year, then you should compare the returns with cash funds which are quite attractive now.

It is more'n possible that "B" grade bonds will give better returns at lower risk.

 

[Dazz]

We do our conservative calculations on 7% p.a. for all types of property.

 

[im sparticus]

just a hypothetical question?

whats better 10%cg and 3% yield, or 7% cg and 6% yield?

 

[im sparticus]

In the process of doing a renovation and based on figures at the moment, for every $1 I will spend, I will add $3 to the value of the property.

ive never understood how people calculate and come up with those figures.......do you show the buyer before photos and ask how much he would have paid if it looked like this?

 

[bogie]

double the value

I usually sell once my IP has doubled in value because I believe it has had its growth cycle especially if this has been achieved in under 4/5 years.

sell up and go to the next growth place and purchase another 2 or 3 IP's with the profit.

and no starting at 45-47 is not too late I started at 42, better late than never

 

[superb]

Has anyone checked out this site yet? Just click on the "Best Growth Suburbs".

http://www.investsmart.com.au/property/

 

[Rixter]

just a hypothetical question?

whats better 10%cg and 3% yield, or 7% cg and 6% yield?

Depends on the size of your asset base and your individual cash flow management position.

 

[BayView]

just a hypothetical question?

whats better 10%cg and 3% yield, or 7% cg and 6% yield?

The first one will make you asset rich and cash poor. Been there.

 

[buzzlightyear]

ive never understood how people calculate and come up with those figures.......do you show the buyer before photos and ask how much he would have paid if it looked like this?

No.

The numbers quoted below aren't the same in my example, but principle is.

Purchased for $500,000, will spend $100,000. Based on comparable sales for renovated properties in the area for same or similar property, current prices being achieved are $800,000.

 

[Rixter]

The first one will make you asset rich and cash poor. Been there.

I don't agree LA. In your situation it obviously did make you asset rich & cash flow poor but you dont know his/her situation and circumstances.

They may be in a superior cash flow situation compared to yours at that time.

Everyone is different.

 

[alexlee]

In any case, if you have lots of assets you can always generate cashflow from it.
Alex