turning 1 house into 6 houses

Just got off the phone with a good (property bear) friend of mine (who picked December 2009 to dived into the share market for low cap stocks - some did go belly up he warns!)

He has the following speculative plan. I suggested he signs on to HC to share his tale (but he can't be bothered).

Anyway, initially I had my doubts but it's starting to sound somewhat viable (only time will tell). It's about (in ratio terms) generating 1 property into 6 properties in about 3-4 years.

Okay, this is how it works. For simplicity sake, let say he had enough cash on hand for one property (worth $1) which he invested in "largely" low cap stocks.

For his portfolio to get back to previous high when the ASX hit 6800 points, his investment has to go up 700% to 800% (that's how hammered his shares were - I wouldn't have touched half of them with a ten foot pole).

Some of his shares have already exceeded their previous peak share price (although he admits MOST of them are still way below their last peak and may never get back anywhere near).

Lets be conservative (rather than being too bullish and factor the next boom in the next 2-3 years to be bigger than anything we have seen, Let's lower his expectation and just settle for his capital gain to be 500% - I think he is already half way there).

Now he works out if one holds shares for more than a year the GCT liabilities (he doesn't work and ownership is split) is around 23% out of $1 of GC (and to smartly sell over 2 financial years - in fact just one month apart - i.e June and July).

Okay...so $1 becomes $5 (very consevative he reckons).
CG is $4. Taxable portion is $2. Hence, he arrives at roughly $4.2

Right, let's again be conervative about house prize falls. 50% may be too difficult for most to comprehend on this forum, so lets go for 40% fall (really only takes us back to where we were a fews years ago - nothing too fanciful).

Alright, again for simplicity say he missed a GC of 20% by not buying a property in December 2008. The $1 house having risen 20% and now falling a minisule 40% gives us $0.72.

$4.2 / $0.72 is about 5.83

According to his formula, he just turned 1 house into almost 6 houses in about 3 years.

If house prices falls more and his shares perform better, he could be looking at 7 houses.