An amazing 44% capital growth in 24-months
Location: New England Region, NSW
Purchase Price: $245,000
Strategy: Cash flow & capital growth
Today, we have an incredible success story to share with all of you. Our client has achieved something truly mind-blowing—a staggering 44% growth on his property in just 24 months.
Client's Story
Peter* was in his 20's and just starting his career, so he had a lower borrowing capacity ($300k) than many around him, but had managed to save up almost $70,000 - kudos to him for saving hard!
With the above in-mind and the focus of building a large property portfolio over the long-term, we needed to ensure that the property we found would not only provide excellent cash flow to help with serviceability, but also achieve capital growth over the short-term. This would allow Peter to ‘recycle’ his initial deposit from this purchase and use it for the next property he buys.
The Search
With a smaller budget, the potential areas were somewhat limited. As part of our research phase, we focused on major regional markets where the median house price was around $300,000 with low vacancy rates, high rental yields and strong growth prospects.
We narrowed the search down to a NSW regional centre with a population over 60,000. This particular region also had multiple industries and amenities such as a major retail, a University, TAFE, private schools, hospitals, and colleges and an airport - tick, tick and tick!
After sifting through hundreds of listings over a 4 week period (eliminating those in flood zones, bushfire zones, lower socioeconomic areas etc), we shortlisted a 3-bedroom brick house on a 668m2 block.
The property itself was a little dated, however it was in liveable condition with existing tenants living in the property (and they're still in there two years later). The potential to renovate and update in the future gives Peter the option to add-value when the time comes, increasing his cash flow and equity position even further. The main focus was to get his foot in the door.
After inspecting the property and providing Peter with a video walkthrough, he gave us the green light to commence negotiations to try secure this property for him.
The Purchase
We were able to secure the property for $245,000 which was well below the original $300k budget. By not maxing out Peter's overall budget on his first purchase, this has helped him with serviceability towards his next purchase.
The property was returning $240 per week (5.1% rental yield) at the time of purchase (Jan 2022) and is now returning $300 per week (6.4% rental yield), with potential for a further increase to $320 per week this year (6.8% rental yield). The power of time!
Not only is this property cash flow strong, but a recent valuation from CBA has come back at an astounding $353,000. That's an equity gain of $108,000 on an initial investment of only $58,250...an 85% ROI in two years!
Peter's total cash contribution was $58,250 including a 20% deposit, stamp duty, legal fees and the B&P inspection.
*Our client's real names have not been used for privacy reasons.
