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Capital Growth?

Discussion in 'General Property Chat' started by Ryan, 6th Jun, 2016.

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  1. Ryan

    Ryan Member

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    Can anyone please tell me how to calculate capital growth for you IP and how to forcast it?
     
  2. Azazel

    Azazel Well-Known Member

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    Hey Ryan, can you clarify what you mean?
     
  3. euro73

    euro73 Well-Known Member Business Member

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    Capital Growth is the increase in value you get.

    if you pay 400K for a property and it increases in value to 600K, you've had 50% CG, or 200K CG...
     
  4. willair

    willair Well-Known Member Premium Member

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    Very hard to tell,location land area zoning all will pay a very important part
    but apart from that it's any ones guess..
     
  5. hash_investor

    hash_investor Well-Known Member

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    Thats the value of property not your capital. Your equity was probably around 80K in that 400K property and the extra 200K is more than 100% on your capital.
     
  6. Propertunity

    Propertunity Exclusive Real Estate Buyers Agent Business Member

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    If people could do forecasting consistently & accurately, they would not still be needing to work. We'd all place bets on winners.

    Overall with property though, if I can buy a few properties worth say $1M in total and can come back in 10 years (7 - 12 for most REcycles) and have it revalued at say $2M, then I'm happy with that kind of forecasting. It's worked for me.
     
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  7. Big Will

    Big Will Well-Known Member

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    Depending on where you are looking at buying if you are buying in Brisbane (as your location is QLD) I would use the average of the last couple of years or maybe 5-7% (depends on how conservative/optimistic you are).

    If you are buying in regional towns in QLD I would use 3-4% at best.

    For me the general rule of thumb is 10% per year a property should yield and that can be 7% CG 3% rental or 4% GC 6% rental or any other combination.

    Note this is a rough rule and some properties will yield more (e.g. a mining town in a boom may get 20% CG) however when the boom is over you could be losing 50% CG a year. Seen many mining towns that went from 200k -> 1M then back to 200k in a space of 5-7 years.
     
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  8. MTR

    MTR Well-Known Member Premium Member

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    Surely I can not be the only one who has done this and I am not psychic, its just watching markets that are moving/rising and playing in all markets across Australia to improve your odds, so jumping from one rising market to another. Over the last 7-10 years we have had 5 boom cycles across Australia.

    MTR:)
     
    Last edited: 6th Jun, 2016
  9. Ryan

    Ryan Member

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    Hi Azazel,
    I want to know if there is a formula out there to calculate CG. I get Your Investment Property magazine once a month and it gives me the Annual Average Growth for my suburb, is this what I use to calculate it? How does everyone else do it?????
     
  10. MTR

    MTR Well-Known Member Premium Member

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    this won't cut it

    you need to look at micro level and what is happening on the ground, magazines only give an overview and highlight potential growth areas, their predictions, which may have already happened, or worse not correct

    start by googling various capital cities, research this site and get tips on areas but do your own homework on this, research to verify what is happening. Phone many re agents in specific areas of interest. Is there a pattern?
    Ask re agents how long are properties on the market, are their multiple sales, who are the buyers? Are prices moving

    keep learning, the more you know the chances are the better result
     
    Last edited: 6th Jun, 2016
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  11. Azazel

    Azazel Well-Known Member

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    The most accurate way would be to organise a valuation on your property through your broker.
    Generally free, and you'll find out how much equity you potentially have.
     
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  12. euro73

    euro73 Well-Known Member Business Member

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    What you are referring to is return on equity, not capital growth. And a 200K return on 80K of equity equates to 150%. I doubt you'll find any support here for the contention that a property purchased for 400K, and now valued at 600K, equates to 150% capital growth. You are looking at this incorrectly, I'm afraid.
     
  13. hash_investor

    hash_investor Well-Known Member

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    I am with you on this one.

    That definition is not considering your actual equity in the property because that is generally not known. It could be 100% or 50% which will make it difficult to come up with one growth percentage number. Many investors here buy with <10% equity so in reality their growth percentage is much higher.
     
  14. Username86

    Username86 Well-Known Member

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    My understanding is CG = (Current Value - Purchase Price)/Purchase Price x 100
    This will give you total CG as percentage then divide by number of years to get annual CG
     
  15. willair

    willair Well-Known Member Premium Member

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