Finance advice
Cam McLellan

Is capital growth the key to financial freedom?

By Cam McLellan

Having savings in the bank simply isn't enough to build wealth. So how can investing in property get you on the road to financial freedom, and how much is enough?

Blogger: Cam McLellan, CEO, OpenCorp

Life lesson

The first question I asked myself when I wanted to build wealth was:"How much is enough?"

Here’s how I found the answer.

When I was 23, I scored a job that more than doubled my salary from $40,000 to $100,000. As a young man, I felt this was heaps of money. But after a whole year on my ‘huge’ salary, I realised I hadn’t saved an extra cent.

This is so common, I think it’s the Aussie way of life. However much we earn, we fund lifestyles rather than save. And that’s no way to build wealth.

Getting real

Once I realised I wasn’t saving enough to become wealthy, I started looking at ways to achieve financial freedom. Back then, I just wanted to supplement my $100,000 income. So I narrowed my options to:

  • Saving
  • Cash-flow-positive property
  • Growth property

No saving me

The previous year had proven I couldn’t save my way to financial freedom, so the saving option was out.

I knew property was a good option for achieving financial freedom. But when I looked at cash-flow-positive property (where returns exceed expenses), I realised my poor saving record would also shoot me in the foot.

You see, even if I got a property to earn me $400/month clear, I knew I’d just blow it on a bigger lifestyle. I was never going to save it, duplicate my portfolio and substitute my $100,000 income.

And so, unless that property also experienced growth, I’d just be spinning my (ever more exotic) wheels. So cash-flow-positive property was out.

I realised then that growth property was the best option for me to achieve that $100,000.

Growing up

Let’s look at that in today’s figures, assuming an average $500,000 growth property price and a (conservative) annual price growth of eight per cent.

Remember, I earn $100,000 and want $100,000 per year coming in to replace that.

3 x $500,000 properties = $1,500,000 value.

8 per cent growth x $1,500,000 = $120,000 per year.

By buying three growth properties, I make $120,000 on average once growth occurs. That’s $20,000 more than my goal. But that money isn’t for me to spend on cars or lifestyle. That money is growing my equity base that I can use to duplicate my portfolio and get more and more growth on it.

Unlike the savings and cash-flow-positive property options, the growth property option gives me cake to eat. Great. So when do I eat?!

Well, once I exercise the patience to duplicate my growth property portfolio several times, I become wealthy enough to buy the cake factory. And have as much as I damn well want. That’s why growth property is the way to true wealth.

Once you get going with growth property, the sky isn’t the limit – the limit is up to you. And so, the answer to the great question: how much is enough?

As much as you want!

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About the Blogger

Cam McLellan

Cam McLellan

Director of OpenCorp, Cam McLellan is committed to sharing his passion and property investment knowledge with everyday Australians.

After thriving in the telecommunications, technology and recruitment sectors and making six BRW Lists in 8 years, alongside accomplished OpenCorp. entrepreneurs Matthew Lewison and Allister Lewison, founded OpenCorp. eight years ago.

Cam started investing in real estate at a young age and quickly mastered the art of building sustainable wealth. He has used the same wealth building strategy to develop a multi-million dollar business, sharing his knowledge and skill with ordinary Australians. Cam has personally bought, sold and developed numerous properties and has an extensive residential and commercial investment portfolio.

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podcast

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  ["title"]=>
  string(72) "Mortgages in a tighter lending economy and why Brisbane is a good option"
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Tune in to the latest episode of Property Showcase, the podcast with the inside track on the products and businesses that will help turbocharge your portfolio, maximise returns and make your overall investment experience seamless and stress-free!

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To hear more about these services, make sure to tune in to this episode of Property Showcase!

 Make sure you never miss an episode by subscribing to us now on iTunes!

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Son Pham is the accredited Head of Mortgages at Rethink Financing\/Rethink Investing. He has over 6 years\u2019 experience writing loans, over 12 years in the wealth management industry working for the likes of CBA, AMP and private practice and he is also a licenced financial planner (AFSL 326450). He has multiple investment properties that are cash flow positive which help pay his mortgage on his home and fund his lifestyle.<\/p>\r\n

Son is able to write all types of residential and commercial property loans.<\/p>\r\n

In this episode of Property Showcase, head of mortgages at Rethink investing Son Pham joins host Tim Neary to unpack how an investor should approach getting a mortgage in place with banks tightening down on serviceability.<\/p>\r\n

Hear from\u00a0Son\u00a0about:\u00a0<\/p>\r\n

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  • The pitfalls that he has seen people get into<\/li>\r\n
  • Interest only loans and if that is the way to go<\/li>\r\n
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    Whether it\u2019s building a successful property portfolio or investing in one of their Development Funds, Open Corp can help you through every stage of your investment journey. The team has 40 property specialists who collectively have been involved in over $4 billion worth of property transactions and the acquisition of more than 8000 homes and investment properties.<\/p>\r\n

    In this episode of Property Showcase, director of investment services for Open Corp Michael Beresford,\u00a0joins\u00a0editor of Real Estate, Tim Neary to share why he disagrees that the cooling market means that the best times are behind us.<\/p>\r\n

    In this episode, hear from\u00a0Michael\u00a0about:\u00a0<\/p>\r\n

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    • Why Brisbane is a good investment option right now<\/li>\r\n
    • How he wants to help clients take advantage of the current market<\/li>\r\n
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Mortgages in a tighter lending economy and why Brisbane is a good option
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Will Magee has had ambitions to enter into the Australian property market for quite some time, but it has been more than just finances holding him back.  Having been granted permanent residency just two weeks ago, Will is wasting no time and is now in the process of signing papers and finding his first investment property.

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In this episode of the Smart Property Investment Show, Will joins host Phil Tarrant to share why he is purchasing his first property in partnership with his brother, discuss the complications that can arise from such a strategy, and unpack the ongoing plan for building a joint property portfolio with his brother.

Will will also share how they approached saving for their first property, why he is taking out the mortgage in his name exclusively, and share their savings plan for the year ahead.

If you like this episode, show your support by rating us or leaving a review on iTunes (The Smart Property Investment Show) and by following Smart Property Investment on social media: FacebookTwitter and LinkedIn.

If you have any questions about what you heard today, any topics of interest you have in mind, or if you’d like to lend your voice to the show, email [email protected] for more insights!

RELATED AREAS OF INTEREST:

From property in Australia to a ski lodge in Japan
Mortgage Trusts, an alternative first step for property investors
Should a real estate title be in one person’s name only?

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A property investment plan years in the making
object(stdClass)#1202 (52) {
  ["id"]=>
  string(5) "18287"
  ["title"]=>
  string(75) "Regional Victoria showing up Melbourne in price performance, new data finds"
  ["alias"]=>
  string(74) "regional-victoria-showing-up-melbourne-in-price-performance-new-data-finds"
  ["introtext"]=>
  string(139) "

Median house prices in regional Victoria outperformed that of Melbourne in the June quarter, the latest REIV figures reveal. 

" ["fulltext"]=> string(2323) "

Median house prices in the regions rose 4.0 per cent to $419,500 but in Melbourne they dipped by 0.6 of a percentage point to $840,000.

The result in Melbourne was due to a 0.8 of a percentage point fall in prices achieved at auction; this was despite a lift of 2.3 per cent in private sales.

Inner Melbourne suffered due to auction prices, where median prices fell by 4.9 per cent to $1,459,000 but it was middle Melbourne that was hardest hit, with a 5.4 per cent drop to $974,500.

Outer Melbourne had a good quarter with the median rising by 0.5 of a percentage point to $681,000.

Apartment prices in regional Victoria grew by 3.7 per cent to $304,500 while the metro media was up by 0.5 of a percentage point to $604,000.

REIV President Richard Simpson said that despite fewer sales, many sectors of the market were performing well.

“2017 was a bumper year and while the trendline has flattened, despite the fall in median house prices in the June quarter, median prices are still up this calendar year for both houses and units, in Melbourne and in the regions,” Mr Simpson said. 

In particular there was been strong growth in regional centres which is probably due to the first-home buyers’ concessions said Mr Simpsons.

“The first-home buyers’ concession has been a boon for regional areas. A new entrant to the property market buying a house at the regional median will pay no stamp duty, while a first home buyer of an apartment in Melbourne at the median price would pay stamp duty of nearly $25,000,” he said.

Mr Simpson said that more prospective buyers are looking towards regional Victoria which is also having an effect in Melbourne.

“Melbourne’s outer perimeter continues to grow. Small increases in the June quarter mean that the median prices for both houses and units have risen over 10.5 per cent from a year ago.

Mr Simpson said moving forward that vendors need more realistic expectations as the highs of 2017 are now over.

“Negative chatter about the future of the sector coupled with stronger lending controls by financial institutions has created some uncertainty and vendors need to be realistic with their price expectations,” Mr Simpson said.

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Regional Victoria showing up Melbourne in price performance, new data finds

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