Do You Need Capital Growth To Achieve Financial Freedom?

So many property gurus talk about capital growth as the only way to make money in property. I want to challenge that assumption today and ask the question “Do you even need capital growth to achieve financial freedom?”

Resources Related To This Episode

2 Properties To Financial Freedom
4 Properties To Financial Freedom

Transcription:

Do you need capital growth in order to achieve financial freedom? Like do you actually need capital growth in order to be financially free? That’s what I want to talk about in today’s episode because so often we just think the only way to invest in property is to invest for capital growth purposes and we’re going to negatively gear in order to achieve that. So I kind of want to challenge that assumption in you today and challenge how much you rely on capital growth and not saying don’t go for capital growth. We love capital growth obviously, but just whether or not you need it. So let’s look at that in today’s episode. Hi. On Ryan from on-property dot com dot EU. I hope people invest in property and achieve financial freedom. And this topic has been on my mind ever since I recorded the two properties to financial freedom episode with Ben.

Actually ever since I had that idea because a lot of you might not know that the two properties to financial freedom strategy actually came about because we had a four properties to financial freedom strategy. So the four properties to financial freedom required you to purchase to capital growth properties in the beginning guys. Okay. I just got kicked out of the room because my kids came home from school. My daughter was upset because she was feeling a bit six. She’s crying. So I’m back up in my office now to finish it off. So as I was saying, the two properties to financial freedom came out of the idea and a strategy called the four properties to financial freedom where you’re required to purchase to capital growth properties in the beginning. So to capital growth properties, purchased them first with the goal of them going up in value.

Obviously that’s capital growth, right? And then you purchase to cashflow properties, so houses that you then build granny flats on. So you’ve got four incomes coming in. So the whole goal of this for property strategy was you buy the two capital growth properties and those capital growth properties, you sell them and then you pay off the cash flow properties. And so then you have cashflow properties that are completely paid off and you’ve now achieved financial freedom. Okay? So you require that capital growth in order to achieve financial freedom in the period that you want. Now, the thought that I had when I was out surfing was that all, my gosh, the only purpose of the capital growth properties and the only purpose of the capital growth is to pay off the debt on the cashflow properties, but the cashflow properties will pay themselves off anyway because they’re positive cashflow and because you’re going to pay them off over time anyway, so you don’t actually need the capital growth in order to become financially free.

So let’s explore that idea of how cashflow can deliver you financial freedom. So in that two properties to financial freedom strategy, you purchase two properties and build to granny flats on each of those properties and you get a rental income of above seven percent on those properties. Over time, that rental income is going to go up as well. You’re going to pay off those properties over time. But the exciting thing about those properties is when you buy them and build the granny flats, you should effectively being in a cashflow neutral position, which means the properties aren’t costing you anything and they’re paying off the debt as well as rents go up over time, you’ll move into a cash flow positive position where the property is paying off the debts and can put a bit extra into your pocket or you can accelerate and pay off those debts faster with that extra money.

So basically you purchasing these properties with deposit that you’ve saved up yourself and then you borrowing the rest of the money and then these properties will pay themselves off over time and eventually when they’re paid themselves off, you can now live off the cash flow and so effectively the cashflow bought those properties for you and then you live off the cash flow in the end. And so never at any point do we need to sell these properties to access any capital growth in these properties. We just did it all with cashflow. So it is possible you don’t actually need capital growth in order to achieve financial freedom. Assuming that you can save the deposits, you need to buy your foundational properties. Now in this situation, we still want to be purchasing properties in high growth areas. We don’t need to access the capital growth. Obviously it’s a nice to have because it’s going to make a net worth look better and it’s going to make you feel good as a person, but another reason for investing in high growth areas is that we’re also going to get the rental growth as well, so we want to invest into areas that are going to grow in popularity.

They’re going to grow in price, going to grow in demand because generally speaking, the rental growth will come with that as well, so we still want to be investing into growth areas, but we don’t actually need the growth in order to become financially free. Now, obviously capital growth is amazing and I would not turn capital growth down. The goal of this episode is not to say don’t go after capital growth and only go after cashflow. It’s just a shape your mind and to change the way you think about investing, to realize you don’t actually need capital growth in order to become financially free and now when you seek out find capital growth, it’s for another purpose and so that purpose could be to buy an areas where the rents are gonna go up or it could be to accelerate the payment of debt on your foundational properties or another awesome reason for capital growth is to actually accelerate how fast you can build your portfolio or to accelerate how big you can build your portfolio and the way that that works is through what’s called equity, which you are probably aware of.

Basically you purchase a property if it goes up in value, the difference between what you owe on the property and what the property’s worth. That’s called your equity and you can actually access this equity through generally through a loan or also through selling a property, but you can this equity in order to have a deposit to purchase another property. So rather than saving up a deposit, doing the grind of budgeting and saving another deposit. Let’s face it, it’s not easy to save tens of thousands of dollars. If your property goes up in value, then you can access that equity in order to use it as a deposit for another property. So capital growth can really help you accelerate how fast you can purchase your foundational properties. It can also change how many properties you can buy, so it might take you years to save up a deposit or you might only be able to save up a couple of deposits, but if you’ve got equity and your property is growing in value, then you can have access to this equity and you can potentially purchase more properties than you would have been able to purchase otherwise.

So capital growth can be a really effective tool for helping you to buy more properties faster or helping you to buy more properties in general. So capital grows definitely not to be scoffed at as definitely not to be ignored. It’s very valuable, but you don’t actually need it in order to achieve financial freedom. So I hope this video has kind of changed the way you look at capital growth. You don’t actually need it anymore, so it’s not the only strategy. It’s not the only thing you need when you’re looking at investment property, so I hope that you go out into the property market with fresh eyes now and that when you’re looking at your goals, when you’re looking at your investment strategy, you have fresh eyes as well. Definitely don’t turn down capital growth. Don’t forget about it, but just think about it in the context of your financial freedom.

If that’s your goal, think about how can this capital growth help to accelerate my financial freedom because often investors just go into the market hungry for capital growth and that’s all they want, but what do you really want? Do you want capital growth for the safety of capital growth? No, you want to invest in property so it’s going to have a positive impact on your life. Ideally, financial freedom will, at least that’s for me, and so now you can look at property and say, okay, how is this capital growth going to help me achieve financial freedom faster or help me che achieve a wealthier version of financial freedom? If you’ve liked this episode, please go ahead and check out my episode on two properties to financial freedom with Ben Everingham. That’s an on-property dot com dot EU. Forward session five. Oh, eight. If you want to go straight to the website and watch it over there, otherwise you can click the link in the description down below. That’s it for me. Until next time, stay positive.

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