The habits that differentiate these investors with massive portfolios from those who have only succeeded in purchasing and maintaining a couple of investment properties are:
Understand the fundamentals
Successful investors, first and foremost, familiarise themselves with the most basic fundamentals of investing in properties. It comes down to your ability to hold the property, which comes down to cash flow.
Asset selection should be an important part of the process for property investors looking to succeed in the business of wealth-creation. You can have one property that takes all your negative cash flow or you can have 10 properties that takes that same amount of negative cash flow—it is one of the fundamentals. That is a leveraging get off smart cash flow management.
Balance cash flow and yield
Some of the factors involved in maintaining the portfolio’s cash flow of successful investors are rents and rental yields. Striking a good balance between the two is one of the most important secrets to success in the business of creating wealth through real estate assets.
The bigger investors understand how much negative cash flow they can afford on a month-to-month basis, and they balance that.
They use a ‘strategic point of view’
Since getting finance has become harder, smart investors always make it a point to ‘strategise’ in order to maintain good serviceability and borrowing capacity.
They’ll take on strategies like ‘Where in my portfolio can I add a granny flat that’s going to increase my cash flow and increase my serviceability?’ They’ll look at it from a strategic point of view. They think differently around things so you can look after their cash flow.
Being an active investor, as in managing and reviewing your rents on a regular basis, is one of the strategies that can help you look after your cash flow.
Another thing that contributes largely to cash flow is the interest rate, which you need to review regularly now that there’s been a lot of changes in the market, including an increased rate on investment and interest-only. However, some of the lenders are seen to be dropping their fixed rate amidst the changing Australia property market.
You might be paying 5 per cent on your interest-only investment loan, but with that same lender, you can get a fixed rate at 4.2 per cent. The difference of a 0.8 per cent over $1 million on your portfolio is $8,000 a year in cash flow.
Successful investors are looking at things like that to really manage their cash flow. Cash flow is king and it is about having those buffers.
They look at the bigger picture
Contrary to what a lot of people may think, successful investors don’t just stick to one particular strategy because there’s no such thing as a “foolproof strategy” in a venture as unpredictable as property investment. Focusing on just one strategy can limit the opportunities you get on the field.
One should strive to be open about the often-changing situation in the market—analyse it based on your goals, capabilities, and limitations as an investor and take a long-term view when making financial decisions.
The asset selection around cash flow and having all these other factors in to really managing your cash flow to hold property long-term is very important.
They have a good team of professionals around them
Lastly, but certainly not the least, successful property investors will attest to the incredible value added by a dependable financial team to their portfolio.
A team of buyer’s agents, accountants, and other property professionals can help you assess your goals and determine the next best step to take in order to achieve them.
They need to look at where they’re going and what they’re doing, and that’s the key. The mistakes that the not-so-good investors make is simply buying the wrong property.