PROPERTY CYCLES Triple Your Capital Growth

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Learn the secret to Tripling Your Capital Growth through Streetsmart Property Investing. Property Cycles mature at different times and investing wisely can lead to much greater returns. Phil explains it all in this video.

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Transcription

Phil:

Hi. I'm Phil Anderson from LifeCorp, the home of street-smart property investors. In recent weeks, I've been illustrating a few very, very interesting factors that street-smart property investors are taking advantage of to give themselves the best chance to double, if not triple, the performance of their investment property portfolios. Today, I'm going to bring those elements together to illustrate how simple yet incredibly effective this formula is. I'm hoping that by the end of today's presentation, you'll agree this is something you simply must put to work for yourself.

Let's bring all of these really interesting elements together to illustrate what I think will really get you very, very excited. Let's start with the property cycles and how the average investor buys property. You've noticed through the recent videos, that I've brought a lot of attention towards how property cycles work. Most cycles around Australia follow a very, very similar characteristic where about 2/3 of a cycle, not much happens. 1/3 of a cycle, typically what I'm noticing is, is that most of the growth happens in this period of time. The capital growth that we experience is very much intensified, and it certainly becomes very, very commonly a 2/3, 1/3 scenario.

When most property investors buy, most novice investors buy, they buy very high. They're looking for the proof in the market. They're looking for the evidence of where to buy. Very few are brave enough to buy here and understand enough, have a formula like I use to be able to identify this ideal time to buy, so a lot of people tend to buy very high in a cycle. To illustrate it, I want to draw this diagram just a little bit differently. What I want to show you is, I want to show you how average investors do buy and what their experience tends to be.

If we drew the line out like so, and we notice that most investors buy very, very early in a cycle, let's have them buy here. If a property cycle looked a little bit like this, instead of looking at the 2/3 and 1/3, I'm going to give the novice investor a little bit of help. I'm going to say that, imagine if they had achieved all of their growth in half of the time. In one of our videos we learned that if a property cycle only averaged 7.2% capital growth, we would actually see a property double every time it went through a 10 year period, so 7.2, that's "The Rule of 72." We've already covered that.

In this 10 year period, if this property cycle didn't get a 2/3, 1/3 scenario, I'm going to be a bit easier on the novice investor. If it actually achieved all of its growth in half of the cycle, now the reality is that they didn't have to wait as many years to get this growth. They owned a property here. Let's say it's a $300,000 investment property. By the time they get to this point, that property would have doubled in price. Now that novice investor would still look like a bit of a rock star for buying a property here if it doubles in price by the time it gets to here, but my big question is, "How much have they missed out on? How many opportunities haven't they been able to take advantage of because of the fact that this particular property sat and didn't do anything for a whole number of years, half of the cycle?"

I want to change this around, as well. I'm going to say that maybe this investor has a number of years until I want to retire. Maybe a 45-year-old investor, so let's use the number of 15 years until retirement. 15 years until retirement, so this like would actually extend out a little bit further, giving this particular property 5 more years to come to maturity. Obviously, if they bought the property where most novice investors buy, they're not going to get any growth for some period, then they're going to get all the growth, we're going for half and half, rather than 2/3, 1/3, giving them a little bit of an advantage, but then there'd be no growth again for some period of time. This $300,000 property would have double by here if it had experienced 7.2 average capital growth. We learned that in the Rule of 72. Then it would have a flat period again. All property markets are going to do it. In this case, this is going to be their experience.

The reality by getting to the end of this scenario, that property would of course have doubled in price through here, but then flattened out again, so the price of this property, or the value of this property is likely to be around $700,000. Given duplication, which we learned in the last video, this particular novice investor could also use his growth through here to buy another property. In this case, they'll be able to buy a property about here, and we'll use this same, the same scenarios as we build it the way that I would like to see it. Basically, they would experience a 5 year period, if they buy the same habits of buying it high in a market, having a long flat period before they experience growth, they could potentially hold that property and not see any growth.

By the end of this period, at 60 years of age, and given that this property had performed, this may still be an acceptable scenario. They may be quite happy with this. At 60 years of age, hitting retirement perhaps, their portfolio at this stage would be worth $900,000. $900,000 and it's a scenario that's very familiar to many property investors. A little bit of success, some success hasn't come as yet and it may come further down the track. Let me give you a better example, though.

Imagine if we bought this property, and we did exactly that. We bought a property that was same value, these people might make exactly the same wage, same amount of time until retirement, but we followed what we learned in the last 3 videos and we bought closer to the growth part of the cycle. Over that same 15 year period, this particular cycle would, this particular property ... Once again, giving fairness or giving a little bit of an advantage back to the novice investor, instead of us getting all of the growth in 1/3 of the time, we're going to just use a half-half, a 50-50 split of the capital growth in this property, as well. When we get the timing right, it takes us a half of a cycle to get the property to double in value. Then it has a time off, and experiences another growth period because we're now coming back into the next cycle. By the time that we get to the end of that same 15 year period, this $300,000 property could have doubled in price to $600,000, flattened out, then doubled in price again to now be worth $1.2 Million.

It could also duplicate. This property could duplicate a property, at least a property, and we'll use the same advantage we've given to the novice investors, and it also have a 10 year period, for it to obviously hit the same retirement period. If we use where we bought at the best half of a cycle rather than buying high and having to wait too long to get the growth, we would get growth through this period, which would allow this $300,000 property to become a $600,000 property. We'll also be able to duplicate 1 more property. We'd also get half of a cycle where we'd obviously buy it when we're going to get growth, so this $300,000 property would also become a $600,000 property. All of the sudden, potentially the same investor on the same income with the same amount of years until retirement, instead of being in a situation where they've got $900,000 worth of property that they've accumulated in their portfolio, they've now got $2.4 Million worth of property in their portfolio. It could all be lunch money, less than $20 a week in holding costs. Very different scenario, could be exactly the same investor, just using some very simple techniques to double, if not triple, the performance of their investment property portfolio.

If you've been enjoying some of these simple, but I think highly effective, tips, make sure you subscribe to my mailing list. I'm going to be putting out videos like this every single week. Please subscribe. I look forward to getting some great content to you really soon. Remember, if you're thinking about buying an investment property, if you can't buy it with your lunch money, don't buy it.

Comments

  1. Paul Kember says:

    GREAT STUFF, Phil, fascinating. Thanks

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