Archive for October, 2007
From my network I can see that the market is at an Interesting stage. Whilst the boom is over, does that mean we panic and bag others that continue to invest though?
No it means, we look at our current portfolios. I liken a property investment portfolio to your car with cashflow being the wheels, the chassis being your assets and you are the engine. Whether you are a little lawnmower engine, or a 10L V12 engine (see below) comes down to you, in terms of your skills and Education. Wheels are pretty important to keeping your car moving. Similarly cashflow is absolutely vital as if you don’t pay your lender their loans they will take your property, and your car will not keep moving. cashflow is not the exciting part of investing – but I can assure you of its importance.
You can wash and clean your car’s body, but the main thing to do is to look at your engine to heighten the speed and ensure endurance of your portfolio and car.
Fine tuning your engine
Maybe you just need to fine tune your portfolio. Every day I get told stories about how people can’t make money in property, and why people are selling. Even some media so called experts are telling us about how hard it is in the property market at the moment. Yes, it is hard to make good money, but if it was easy everybody would be doing it. I Mentor a few investors, and what I am recommending is in some cases fine tuning your engine and in other cases – a complete engine overhaul.
The main reason I need to overhaul my students engines if because they have been got to by their friends and families – the “doubting Thomas’s”. Hey there is good reason to doubt and you should always ask questions, however if you want to be one of those that really gets ahead and continues their great growth you need to analyse you portfolio, have some goals and commit to them 150%.
I know some people are finding the market tough at the moment. One of my clients has $1.5 million of borrowings coming off long term fixed rates below 7% over the next 3 months, which means many tens of thousands a year more in Interest costs. So instead of joining the masses panicking and selling property consider all your options. Sure selling your property is a valid option, but there are other options out there. I am advising clients to:
- look at your borrowings (possibly with the help of your Mortgage broker) - can you restructure your borrowings to ease your cashflow: change to Interest only loans, have the loan term extended, or possibly get a cashflow Mortgage (although a binding ruling from Inland Revenue as to the tax deductibility of the capitalised Interest has me in two minds about this product at the moment…);
- look at ways of adding value and rental to your rental property: maybe your have lots of land to subdivide, build a new house, minor dwelling on, add an extra bedroom, deck, cosmetic renovation, fix that dilapidated fence, splash out $60 on a new letterbox with decent numbers on it;
- look at ways of getting extra cashflow outside property (for some people it may be getting a second job, getting involved in a network marketing Business,getting a payrise/bonus from your job or extra funds from your Business;
- look at ways of getting extra cashflow from property - eg. propertytrading or Lease Options (my good friend and super investor and developer Steve McMenemy has put a two more Lease Option deals away this month giving him and his wonderful family an extra $25K surplus cashflow per year. Imagine if you had a few good Lease Options under the belt like Steve does and what that could do for you?
- look at applying any extra cash you get from savings, cashflow sources above, inheritance money etc, to reducing your debt.
Financial Freedom
The strategies you choose and actions you take determine your success and failure. It is ok to choose the path towards financial freedom and to get help along the way.
The day is today – the day in which you regain control over your financial portfolio.