Capital Growth Properties - Investment Strategy - Search Party Property

Capital Growth Properties

Growing Equity

Capital growth is the increase in the value of your property investment from the time of purchase. This is a property investment strategy that is typically reserved for a long term game, where your expectations are that the property will double or triple in value if you hold onto it for long enough.

Going for growth

A capital growth strategy is highly dependent on the property investor to have the time and patience to allow the market to move through potentially two property cycles.

It is an attractive strategy for those who don’t need the cash flow to cover the ongoing cost (i.,e. Mortgage repayments of the investment, have the foresight and market expertise of where the best buys are for this type of strategy and forgo short term wins for a long term gain.

This has been a great strategy by some of the big property players. Buying land in areas that are earmarked for large scale infrastructure and development that they hold onto, and then wait for the market to catch up. They are completely comfortable with waiting for as long as it may take - because they had done the homework early on and have full confidence that the boom will come. When the boom does come they have options to play around with, for example, sell, develop, split, reinvest, etc.

Time and patience

A capital growth strategy is highly dependent on the property investor to have the time and patience to allow the market to move through potentially two property cycles.

It is an attractive strategy for those who don’t need the cash flow to cover the ongoing cost (i.,e. Mortgage repayments of the investment, have the foresight and market expertise of where the best buys are for this type of strategy and forgo short term wins for a long term gain.

This has been a great strategy by some of the big property players. Buying land in areas that are earmarked for large scale infrastructure and development that they hold onto, and then wait for the market to catch up. They are completely comfortable with waiting for as long as it may take - because they had done the homework early on and have full confidence that the boom will come. When the boom does come they have options to play around with, for example, sell, develop, split, reinvest, etc.

Do your research

The two considerations you need to take for a capital growth strategy:
1. Doing the research
2. Ensuring you have access to cash flow

We have observed investors taking a capital growth strategy approach but then buying in the wrong market. The research lacked and the sit and hold and wait for the boom that never came. The question then lies around how long do you sit on a property that isn’t delivering to your strategy? If you decide to sell when is the best time so you can minimise further loss?

On the flip side, we have seen investors that have bought into the Western Sydney market at a mid $400K market and waited 12 years for their investment to double. In the meantime they reinvested some of the equity into a cash flow positive property, so they could have the best of both worlds. Some investors may see 12 years is a long time waiting for the property value to double, but for this investor, it suited their risk profile, provided a safe and comfortable introduction to the property market, allowed them to be a passive investor, and also got them to get into the Sydney market, something that would not have been possible 5 years later.

Combining Strategies

There is no right or wrong approach. The strategy you take is unique to you and your situation. You may find a combination of strategies work best or just one. Hence the importance of a strategy session. What you think may be the right strategy for you now, may not be in two years time, and that’s what we need to uncover upfront. Part of our strategy sessions includes ‘what if’ scenarios so we can be as confident as we possibly can on the strategy that gets the green light.

This diagram covers the key areas: your financial structure, data investigation and review and the planning component, that form part of your property investing strategy.

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