Managing your Property Portfolio
When investing in many properties it is always good to have a long term strategy
on where you are going and what you want to achieve. As with any investment you
want a goal and a direction on how to get there. A great analogy I use for this
is sailing. You have a destination in mind, you need to know where you are now
and you need to know which direction to go to get there.
Goal
The destination is the goal, you must know where you sit now in terms of
property and from there you can devise a way to get to where you are going (your
goal). You might get knocked of course occasionally (e.g. the wind) but as long
as you are tracking the direction you want go you will get there. This just
means we need to continually track where we are, to make sure we reach our goal.
Things will always change and the plan you originally thought would get you
there, will now not. So set the new course to continue towards your goal, even
if you went sideways for just a bit.
In terms of property we first need to set a goal. How many properties would you
like in how many years and will they be long term investments generating
positive cash flow or will they be high capital growth negatively geared, with
other positively geared cash properties supporting it. Go an write this down
now, for say 5 years into the future. Once this is set, make sure it is
realistic, measurable and time framed. So I want 3 properties in 5 years with 2
positively geared of $100 per week and one negatively geared of $50 per week but
a high capital growth expected. I want lots of properties in 5 years is not a
great goal as you will never know if you actually get there.
Cash Flow
Cash flow is the next major step in managing your portfolio. How are you
supporting the mortgage repayments on your investment property and is there
still enough there to cover you if the interest rates drastically go up. For
each property you buy ensure you have cash flow coming from somewhere to support
it. This may mean some positively geared properties, or a business, or your job.
If it is a business or your job ensure you have sufficient funds in case cash
flow stops or diminishes from these sources.
Exit Strategy
An exit strategy should be part goals. This isn’t if everything falls through
how do I get out quickly, but how do I prepare to sell my properties in the
future to either buy more properties or generate some cash for you to increase
your lifestyle. Know what the value of the house will be when you want to sell
and how you would go in selling your investment property to gain the maximum
amount of capital growth. Remember to take into consideration the tax
implications of capital gains, the cost of real estate agents, pest inspections
and anything else that might be applicable in your area of the world.