David Whitburn

It is no secret that a number of factors are making the property investment environment different to a couple of years ago, particularly:

• higher purchase prices
• higher interest rates
• higher council fees, contributions, rates and levies
• higher building compliance costs

However does that mean we do nothing? Or do we take notice of the situation and adapt to the market and change our approach to one that will succeed today.

In the immortal words of Billy Ocean: “When the going gets tough, the tough get going”.

It’s time to evolve

If you do nothing, since basic laws of nature apply, the result is that you get what you put in, ie. nothing out.

Therefore we need to realise that the buy/hold strategies of yesterday by themselves are not going to get us ahead in this market with challenging times ahead, and little pressure for rental growth over the next few years. We want to keep investing, as it is great to have assets working when we aren’t, however to compliment this buy-hold long-term strategy we need to trade properties and focus on equity to acheive our goals.

Equity is king

Whilst the importance of cashflow cannot be underestimated, as it pays for your R+M and the Interest expense to let you keep your property, equity is king. Equity allows you to pay down bad debts like hire purchase payments, personal loans, those naughty credit card purchases etc. By having equity in deals you can choose to trade them, and pay down profits into existing buy/holds to give you cashflow, or revalue and buy another.

Speaking to other successful investors that operate all around the country positive cashflow is all but gone on. Therefore it is time for us now to create the deal. Whether we get it from the market, by buying below value, renovating to add value, or developing to create equity – there are an abundance of properties that you can make many tens of thousands of dollars out of every day.

Perhaps you need to consider the Wealth Wheel where you buy/build/sell 3 properties and from the profits purchase a property with very low loan on it. The low loan means less interest expense for you and a positive cashflow property with bug equity in it. I have clients are doing very well with this strategy, but I emphasize that this is just one strategy available.

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