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Minimum requirements for selection (Yield & Growth)

Discussion in 'General Property Chat' started by Phil_22, 10th Aug, 2015.

  1. Phil_22

    Phil_22 Well-Known Member

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    Hi All,
    Just wondering what you all look for as absolute minimums when selecting an IP
    i.e. X% Yield & projected Growth of x % over 5 years?
    Cheers,
    Phil
     
    Last edited: 10th Aug, 2015
  2. D.T.

    D.T. Adelaide Property Manager Business Member

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    I don't really specify a growth % as no one has a crystal ball. I only buy in what I believe to be high growth areas though.

    I'll also only buy investments that pay me from day 1.
     
  3. Phil_22

    Phil_22 Well-Known Member

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    @D.T. thanks just edited to projected growth.
     
  4. FireDragon

    FireDragon Well-Known Member

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    Personally I think there are no hard and fast rules. It probably depends on your goals, financial situations and strategy. For example, If I am about to retire, I will probably buy something with higher yield and lower growth. If I am young and have no problem with serviceability, I will probably buy something with higher growth and less yield. Some people may also buy something with renovation / development potential and the property may increase value by 20% after the renovation / development.
     
  5. Big Will

    Big Will Well-Known Member

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    As a guide you want at least a combined 10% growth/yield from the property.

    E.g. 3% yield 7% growth or 6% yield 4% growth

    A better scenario is like 5% yield and 8% growth but they are harder to find :).
     
    Phil_22 likes this.
  6. Travelbug

    Travelbug Well-Known Member

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    You need to be careful to not get overly attached to specific numbers. When I first started I was listening to too many different people. Some were saying it had to have a certain yield. I passed on a property that didn't meet that criteria but I neglected to see the other great qualities (ability to add great equity via a Reno). I've regretted not buying that property. So look at the big picture. Each property needs to be assessed on its own merit. Yes numbers are important but different numbers for different outcomes.
     
  7. TheSackedWiggle

    TheSackedWiggle Well-Known Member

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    Is the yield after pm/maintenance costs?
     
  8. Chilliblue

    Chilliblue Well-Known Member

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    @Travelbug has hit it on the head. Every property needs to be reviewed on its own merits against your owns needs and wants.
     
    Leo2413 likes this.
  9. Leo2413

    Leo2413 Well-Known Member Premium Member

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    Each purchase is slightly unique as it needs to have an immediate strategic place in your portfolio as well as a longer term place. Having said that, to answer the question the only 'absolute' minimums I can think of for me are:

    1. Buying below intrinsic value
    2. Scope to add value and manufacture a 'profit' from day one.
    3. Acceptable cash flows to overall portfolio.
     
    Phil_22 likes this.