Time for a property review
Whether it’s your home, a residential investment or a commercial property, these are all assets which require regular reviews as markets are always moving. But what exactly do you check or review your property against?
Ideally, we’re talking about more than just looking at purchase prices and rental yields, but also suburb changes (for example, infrastructure changes, re-zoning or even visual reviews that reveal ‘enjoyment’ aspects such as a two storey house that now blocks your view). The review data should also include interest rate changes, and the changes to the ‘all important’ loan-to-value ratio for each property as well as your portfolio as a whole. For the full story on primary ratios and performance indicators you can use, click here.
We recommend starting with basic performance indicators then, after you have completed your review and updated all your ratios, the next step is to follow the process below to establish your focus for the coming 12 months.
- Property roles – looking over the results, review the role each property has in your portfolio. Is it to provide cash flow, is it to hold until the re-zoning allows for a higher yield, or is it time for a freshen up and then have the property revalued?
- Property tasks – for each property, outline the tasks required to optimize the property. This could include reviewing the rental returns with your property manager, conducting maintenance, or calling your local council to check on development applications scheduled for your area.
- Property visit – this is optional, but depending on how many properties you own and their locations, you may like to schedule in an annual visit. Your property manager should be conducting reviews either twice or three times per year, but you also have the right to view your own investment property as long as you give your tenants reasonable notice.
- Review your goals – do you really still need 10 properties to replace your income or is it only eight now that the rental returns have increased? Identify how close you are to your target, and how much progress have you made over the past 12 months.
- Make your plans for the coming 12 months – given the performance of your existing portfolio (even if it’s only one property), what is possible now? Do you need to focus on purchasing a cash flow property that will help you pay off your loans? Or are you now in a position to undertake a mini-project?
- Consider structures and entities – if you are starting to build a portfolio, it may be time to speak to a good accountant with strong property knowledge who can advise you on the most appropriate entities to use for your next purchase.
- Review the market – now that your goals are clear, use this information to decide what you need to buy, and where you will get the best pay-off for your efforts. Consider macro factors – for example, government policy or bank requirements (hello serviceability issues) – as well as local market indicators such as pricing and demographic changes.
Ideally, the aim is to build a diverse portfolio that will allow you to fast track your goals, take advantage of market opportunities, and increase your attractiveness to the bank. Until you have built enough equity to buy property without borrowing funds, your ability to service your loans is critically important.
The best way to do this is to stack your portfolio like different sized lego blocks. You should have a few lower priced but high yielding properties for cash flow and serviceability, one or two properties that deliver on capital growth and, if you can, one mini-project that will deliver a block of money.
If you have completed all the tasks above, you’re good to go. If it’s all too boring, you’re unsure, or you simply don’t have time to complete the analysis for yourself, feel free to contact us. We can discuss your requirements and potentially help.
Buy smarter = limitless ways to build lifetime income
Crave Property Advisory is a unique property strategy and buyers agent service. As the only independent and unbiased advisory that can help you use any property strategy Australia-wide, Crave’s services extend to home, investment and commercial property. A highly client focused organization, Crave developed the Modular Investing System (MI System) to provide clients with the ability to use a tailored mix of strategies and efficiently build profitable portfolios that create lifetime income.
Debra Beck-Mewing is the CEO of Crave Property Advisory, and has more than 20 years’ experience in property investing, Australia-wide. She has used a range of strategies to build her property portfolio including renovating, granny flats, sub-division and development. Debra is skilled in identifying development opportunities, and sourcing properties that have multiple uses and multiple exit strategies. She is a Qualified Property Investment Advisor, licensed real estate agent and also holds a Bachelor of Commerce and Master of Business.
Disclaimer – This information is of a general nature only and does not constitute professional advice. We strongly recommend you seek your own professional advice in relation to your particular circumstances.