The aim of the game I play is to have several sources of income where I don’t have to trade time for money. Where I extend myself once to do the legwork, and then just have to review regularly, yet it’s still putting money in my pocket. One of these avenues for me is property and why I share my learnings on my blog is because I know many of you would view property as a great asset, but not entirely sure how to make it happen.
Property investing is not just about the property, sure there are things that the property has to provide according to your goals and targets which help your growth, but if you are aiming to leverage your wealth, your portfolio will require financing. Pick one bad egg and it can halt your growth for a long time!
So what could help you grow?
1. To own a big property portfolio you need to balance cashflow properties and capital growth properties. If you can get both in one, it’s even better, however normally fairly rare! Generally speaking cashflow properties are in areas where growth is slow, and capital growth often occurs in areas where your rent doesn’t necessarily cover the mortgage repayments.
Why is it important to have a balance? Well if you don’t the banks will stop lending you because of the lack of income a.k.a. serviceability. Especially in the current financial climate, that is very important!
2. Don’t try to have all your loans with one bank. At one stage I thought it may have been a good idea! It cost me dearly! Because they viewed me as a risk they were trying to charge me a ridiculous amount of LMI, even though I had standalone loans and securities against each loan, which I refused to pay, and my finance clause was up. That property increased in value by $200K in 18 months!
So do yourself a favour, get a good mortgage broker that will find the best loan for you. It can save you a lot in fees, and help you secure the deal you want!
3. Review your loans regularly – see if they are competitive, negotiate with the bank in the first instance if they are not. Shaving of a few points of interest can save you big bucks!
4. Mortgage Insurance is not the enemy – it can help you grow quicker possibly. BUT! That doesn’t mean that you have to pay just any amount because it can turn a profitable deal into not profitable. So do your numbers before you say yes to LMI.
5. When you are buying your next property, don’t just focus on that one property. Figure out what position it will leave you after the purchase. Will it increase your cashflow or will it drain on it? Will it give you a higher level of net worth? Check your portfolio as a whole.
6. It is OK to go interest only. Again it can help your growth. Just remember when you are conducting your review to check what option works better for you at the time. In times of low interest rates it can be beneficial to change to principal and interest payments. It helps you create more equity.
7. Don’t over extend! This can bring your property empire down quick and fast! Make sure that you always leave a buffer in place so that you’ll be fine if you can’t rent a property out for an extended period.
These lessons came to me over the past two decades of investing. Some were costly, yet I still love it! You need to be a long term thinker, be able to plan ahead, stick to your goals and execute the plans you made.
Getting on the property ladder starts with saving your first deposit for that first property, if you cannot even see how you could make that happen, then check out my Let’s Get Debt Free Masterclass by clicking here, to help you open yourself up to abundance, and start getting those savings plans into play!