Season 4 Episode 56 - Invest where it Counts: Blue Chip Vs Growth Suburbs

In this episode, OpenCorp CEO Cam McLellan and Director Allister Lewison delve delve into the differences between investing in premium (blue-chip) areas and more affordable (growth) suburbs, with an emphasis on portfolio growth and wealth creation.

Key points include:

Entry Price and Borrowing Capacity: Blue-chip properties require higher entry prices, which limits growth potential as they are more expensive and often yield lower rental returns. Growth suburbs offer more affordable entry points, making it easier for investors to buy multiple properties.

Cash Flow and Holding Costs: Investing in blue-chip areas typically results in higher holding costs, which can negatively affect cash flow. Growth suburbs, on the other hand, allow investors to hold more assets for less out-of-pocket costs due to lower entry prices and higher rent-to-purchase ratios.

Emotional Attachment: Many first-time investors make emotional decisions by purchasing properties in areas they are familiar with or emotionally attached to, often leading to less favourable financial outcomes. A more strategic approach involves purchasing properties based on financial fundamentals.

Leveraging the System: TIPS:  Experienced investors understand how to navigate  the financial system, particularly through understanding valuations. Properties in growth areas, bought strategically under the median house price, tend to be valued comparatively to their greater counterparts, where this can lead to greater equity growth over time.

Market Cycles: In a market driven by affordability and supply-demand dynamics, growth suburbs consistently outperform blue-chip areas. Blue-chip properties may see short bursts of high growth during favourable economic conditions, but growth suburbs tend to provide greater, long-term capital appreciation.

Data-Driven Decisions: At OpenCorp we have over 20 years of client data that consistently shows that investing in growth suburbs delivers superior returns compared to blue-chip areas, with clients outperforming the market by significant margins.

The conclusion is that while blue-chip properties may seem appealing due to their prestige and location, they often underperform compared to well-chosen growth suburb properties in terms of portfolio scalability and wealth creation.

Facebook: http://www.facebook.com/opencorp
Twitter: @OpenCorp_au
LinkedIn: https://www.linkedin.com/company/opencorp-au
Instagram: @OpenCorp