View your property port­fo­lio as a busi­ness

The be­gin­ning of a new fi­nan­cial year is a good time to sit back and an­a­lyse your property port­fo­lio in the same way any small busi­ness should an­a­lyse its per­for­mance writes Patrick Bright.

Business First - - CONTENTS - by Patrick Bright

Too of­ten, I find in­vestors are re­luc­tant to ques­tion whether their property in­vest­ments are get­ting the best re­turn. For some rea­son they seem to favour leav­ing them to tick over in the hands of a property man­ager. Re­gard­less of whether you have one, three, five or more prop­er­ties you need to treat them all like a busi­ness and un­der­take reg­u­lar re­views. Ideally these re­views should be done six monthly but no less than an­nu­ally. You need to ask the tough ques­tions on a reg­u­lar ba­sis if you want your in­vest­ment to per­form at the high­est level.

As a stocktake, here are five ques­tions that you should ask to help you re­view your property port­fo­lio:

1. AM I GET­TING THE BEST POS­SI­BLE RE­TURN ON MY IN­VEST­MENT?

If you want to max­imise the re­turn on your in­vest­ment you must en­sure you are re­ceiv­ing the best pos­si­ble re­turn on it. In­sist that your property man­ager un­der­takes reg­u­lar rent re­views to make cer­tain your rental rate matches or ex­ceeds cur­rent mar­ket val­ues and if it’s con­sis­tently fall­ing be­low the mark, then you’ll need to ask why? As a start­ing point ask yourself: “Have I selected an in­ef­fi­cient property man­ager or have I pur­chased a property that is per­form­ing poorly and will con­tinue to do so?”

2. AM I PLAN­NING ON ADDING TO MY PORT­FO­LIO?

By writ­ing down clear goals for the fu­ture growth of your port­fo­lio you should be able to de­ter­mine how much money you’ll need for the nec­es­sary de­posits and in­cor­po­rate this in­for­ma­tion into your over­all fi­nan­cial plan. Make sure you work out whether you’re buy­ing prop­er­ties to hold for the long-term or whether a buy, ren­o­vate and sell strat­egy would be bet­ter suited to your needs. You will need to fac­tor in any ma­jor changes to your likely in­come (e.g. plans to start or grow your fam­ily) or ex­pen­di­ture streams when ex­am­in­ing the time­frames needed to save the de­posits. If you’re due to add to your port­fo­lio in the next 12 months then start get­ting your fi­nances in or­der now to de­ter­mine the eq­uity you have in your ex­ist­ing prop­er­ties so that you know how much you have to draw on for a new pur­chase.

3. AM I ON TRACK TO REACH MY RE­TIRE­MENT NEEDS?

Make sure your fi­nan­cial plan is on track to meet your re­tire­ment needs and in­cludes the tim­ings of when you want to buy more property to build up your as­set base. Don’t un­der­es­ti­mate what it will cost you to keep your liv­ing stan­dards at the same level or bet­ter than your cur­rent life­style as you are likely to spend more in your re­tire­ment years, par­tic­u­larly if you want to travel. If you’re not on track to meet your fi­nan­cial goals then it’s bet­ter that you re­alise this sooner rather than later so you can make ad­just­ments now. Small ad­just­ments over 10 or 20 years will make a sig­nif­i­cant fi­nan­cial dif­fer­ence when it comes to re­tire­ment.

4. AM I GET­TING THE BEST IN­TER­EST RATE?

Lend­ing in­sti­tu­tions are keen to com­pete for your busi­ness and so you should shop around to see if you are re­ally get­ting the low­est in­ter­est rate avail­able in the mar­ket. A drop of even 0.25 per cent will save you tens of thou­sands of dol­lars over the life of the loan but be sure the con­di­tions of the loan also marry with your fu­ture plans. It is ad­vis­able to re­view your in­ter­est rate level ev­ery one to two years to make sure you’re get­ting the best deal. You may even find that your cur­rent lender is will­ing to match a com­peti­tors’ rate, sav­ing you the has­sle of mov­ing, but you’ll never know un­less you ask!

5. AM I TAK­ING AD­VAN­TAGE OF ALL THE TAX DE­DUC­TIONS I AM LEGALLY EN­TI­TLED TO?

Sur­pris­ingly many property in­vestors claim sig­nif­i­cantly less back from the Tax Of­fice than they are en­ti­tled to each year sim­ply be­cause they don’t claim ev­ery le­git­i­mate de­duc­tion. Tax rules and reg­u­la­tions change ev­ery year and you need to keep abreast of the cur­rent en­vi­ron­ment. For this rea­son it pays to in­vest in a good ac­coun­tant who can struc­ture your prop­er­ties tax-ef­fec­tively and keep you up-to-date on all the lat­est rul­ings from the Tax Of­fice.

Patrick Bright is the Di­rec­tor of EPS Property Search. As a buyer’s agent he has pur­chased over 500 mil­lion dol­lars of real es­tate for clients and is the best-sell­ing au­thor of four Real Es­tate books in his “In­sider’s Guide” se­ries.

Newspapers in English

Newspapers from Australia

© PressReader. All rights reserved.