Want High Capital Growth Without Sacrificing Cash flow?

Impossible! You might be saying to yourself as you read the title.

It is usually suggested that you need to choose between the two, the perfect world would allow you to do both but it’s usually very difficult to achieve both.

Well let me fill you in on my now not so little secret, on why you don’t necessarily need to make a trade off between opting for either capital growth or high rental yield.

The reality is you need both to create wealth.

You need cash flow to help you pay for your portfolio during the growth phase and you need also capital growth to be able to access equity to continue purchasing and growth to be able to sell up one day and put money in the bank.

So don’t choose, you don’t need to.

The Trid3nt Strategy®

The Trid3nt Strategy® is a way of increasing the rent and property value of a property. It’s a very easy to follow process and involves:

  1. Buying the property below the market value
  2. Renovating to the correct demographic to add greater value
  3. Selecting a property in a high capital growth area that will grow your equity in the property

All three steps can increase the equity of a property while minimising the risk.

If you can successfully manage to follow all 3 stages and execute them with precision, you can expediently increase the capital growth of your property and gain a higher rent.

The higher rent against the original loan means an improved cash flow to help you pay the differences between the income and expenses associated with your property.

Risk minimisation with the Trid3nt Strategy®

Buying a property that is under the market value has instantly increased your bottom line come sale time.strategy-design

Equity has been added as you managed to get a price that is valued under the market. Renovating the property is the second way for you to add equity to your investment, and finally choosing an area with a high capital growth will also lead to potential equity growth.

That’s all well and good Jane, but how does this minimise my risks?

Hold your horses, I’m getting there.

When it comes to real estate investing, we can make all the correct choices but sometimes the cards just don’t fall our way.

The benefit with using the Trid3nt Strategy® is that even if one of the three methods fail, we still have another two to fall back on. And even if two fail, you’re still providing yourself with an extra safety net.

So you have plan A and B to fall back on.

Now this is better than most investors who have one strategy and if they get that wrong well let’s just say the Hope Strategy, ‘I hope I make money’ strategy is probably the biggest risk any would be investor could make.

Putting all your eggs in one basket and hoping that in a few years the area you picked or the renovation you made is going to increase the value of your property 10 fold, is a bad idea.

Investing is a business and you need to have a contingency strategy in place for when your plan A fails.

The Trid3nt Strategy ® is created in such a way that even if one aspect doesn’t go the way you want it, you still have another two options that can.

This minimises your risk while increasing your maximum growth

Renovating for the correct demographic

Whether you already have an investment property ready to renovate, or are in the process of looking, you should always be researching the local demographic of the area.

Is there a high amount of homeowners or is the area full of renting tenants? How old are they? Is the area suited for young couples and families, or for single working professionals and students?

Before you even to pick up a single hammer, you should find out who your demographic are, and what they want.

A common mistake people make when renovating is doing what they think would be best for themselves, while completely disregarding what the buyer or tenant would desire.

Renovating with the buyer or tenant in mind will not only increase your rental yields and capital growth, but sometimes you will actually add more value to your property than the actual cost of the renovation itself.

Capital growth or rental yield? Do you really have to choose?

The philosophy of real estate tells us that you can never get both capital growth and great rental yields on a property when investing. But I want my cake, and I want to eat it too!

Adopting the Trid3nt Strategy ® will give you the best of both worlds. Buying a undervalued property in a high capital growth area will immediately show you a profit.

The renovating along with adding value to the property can also help increase the rental yield if you follow our advice of renovating to the correct demographic.

Sometimes you can’t have it all, for instance in a fast upward moving market finding a below market property is difficult, not impossible but hard, however there is 2 ways you can still make money.

Property investing doesn’t come without its fair share of risks, they key to getting ahead is to finding smart ways to minimise your risk, while finding ways to maximise your gains.

Yes, it’s not easy I know, but having a well defined strategy is a great way to start.

For those of you like me who want the best of both worlds when it comes to capital growth and rental yield, the Trid3nt Strategy® is the way to go.



Want more of this type of information?


Jane Slack-Smith

About

Jane Slack-Smith is the Director of Australia wide Investors Choice Mortgages, Founder of Your Property Success online education and was awarded Australian Mortgage broker of the year. Visit www.investorschoice.com.au


'Want High Capital Growth Without Sacrificing Cash flow?' have 4 comments

  1. August 19, 2014 @ 7:54 am Amarjit

    Good Morning Micheal,

    What would you do if after six (6) years the property have only grown to about 24% but is cashflow neutral ? Keep it or sell it ? Please advise. Thank you.

    Best Regards

    Reply

    • August 19, 2014 @ 8:51 am Michael Yardney

      Amarjit
      I don’t know your personal circumstances nor anything about your property, so I can only give general advice.
      It seems like your property has UNDER performed – 24% capital growth in 6 years is not a wealth producing rate of return. Firstly you have to understand why this has happened, but if it’s becuase of the location (something you can’t change) then you should seriously consider the option of selling it and buying an “investment grade” property

      Reply

    • August 19, 2014 @ 12:58 pm Troy

      Hi Amarjit,
      If you believe all the trends, and that Australian property in Capital cities tends to double every 8-10 years, then hold on to your hat!
      That underperforming property may return a 70-odd percent increase over the next few years.
      Sell it now and the person who gets it will make all the growth.
      I trust that it is in an Australian Capital city, other than Sydney or Melbourne?
      Best of luck with that property, and with picking the choices available.

      Reply

      • August 19, 2014 @ 7:34 pm Michael Yardney

        Thanks for your comment Troy
        Unfortunately I disagree. If a property has under performed in the past it is wishful thinking to hope it will perform differently in the future. Sure on average properties double in value in 10 years but many don’t ( I guess averages would suggest half don’t) so I treat my properties like a business and if an asset under performs firstly I try and discover why, then I see what I can do about it

        Reply


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