It’s been an interesting time for property investors. Increased interest rates, surging inflation, and the media’s obsession with fluctuating prices and auction completion rates have added drama and heightened tension to the property sector.
These external factors ask a fundamental question: Are you in a good cash flow position to weather the turbulence that may be coming down the line?
All Property Is Personal
If your property portfolio reflects your strategy as an investor, then what works for other investors may not work for you.
Many property investors started by buying older properties that they renovated and subsequently flipped at a substantial profit. Other investors made their return on investment by acquiring new properties and holding over the long term.
All Investments Should Pay Their Way
The bottom line for your investment properties is that they should pay their way. Generating free cash flow should allow you to add additional properties to your balance sheet.
Unfortunately, holding onto too many negatively geared properties during a market downturn may bite into your cash flow. If this situation sounds familiar, how will you manage your dwindling cash flow?
Where Does Your Property Portfolio Presently Sit?
A sustainable investment property portfolio needs to be sufficiently robust to perform in a growth market while weathering cyclical market downturns.
When did you last audit your cash flow position?
Ensuring your property portfolio is robust and sustainable is the first step on the path to a healthy financial future. Here are five ways you can raise the cashflow generated from your investment properties to ensure your investments are sustainable:
Smart Options For Increasing Your Cash Flow
- Renovate or refurbish? Property is highly competitive so keeping your property fresh makes sense. If your bathrooms or kitchen are seven years old or older, it’s time to refresh!
- Review your costs and ongoing expenses annually, particularly your insurance and interest rates to ensure they’re competitive
- Pay down your mortgage. Reducing debt is a smart way to address haemorrhaging cash flow
- The market sets the rental value so look at the market and consider a rent increase. Alternatively, keep your tenant sweet with small but regular incremental rent increases
- Differentiate your property. Adding solar and a battery could appeal to tenants and allow you to increase your rent. Do your due diligence and research your options.
There’s plenty of money to be made during the next economic downturn if you are well positioned to buy (that’s what smart investors do!) a value-for-money property.
Making Money During A Downturn
Properties able to deliver high rental yields combined with the promise of future high capital returns represent the optimal investment strategy. If your initial investment property performs well, and you’re financially secure, it’s time to think about adding a second property.
Get your property strategy right and you can easily buy four properties that generate the same financial result as ten properties. It’s about picking high-performance properties.
Lower Your Risk By Diversifying
To spread your investment risk and ensure your property portfolio remains sustainable, work to establish a diversified portfolio comprising both city and regional properties over the long term. You should also explore acquiring properties in several states or territories, to mitigate land tax issues.
Once your investment property is set up to be sustainable, you’ll find yourself benefiting from a reliable cash flow. Remember to annually review your costs and revenues to ensure your investment property is firmly on track.