Since Covid hit earlier this year, it’s made investors realise what is the most crucial factor in the investment equation.
The large elephant in the room is the Cashflow debate.
Having been in the property investment arena since 2002, there’s been a sizeable shift in the way that investors are now approaching investing.
COVID has taught us many things but the most important lesson for investors is the way that portfolios are cash flowed.
We know for a fact that when jobs were either decreased in hours or completely lost over the past 6 months, those investors holding negatively geared property portfolios were hit very hard.
Some were forced to make the choice between requesting mortgage deferments or trying to sell their investments in a very uncertain, downward trending property market. Those who had negative equity couldn’t sell their properties unless they were prepared to take the financial loss.
Many of these investors weren’t fully aware of their exposure to this risk until it was too late.
This is the thing of nightmares and serves as a reminder that when times are the hardest, having access to cash will always help us weather the storm.
I can honestly say that those clients, friends and colleagues who are sitting on large positive cash flow portfolios were placed in the best position to keep going, hold their properties and were even able to assist their tenants with rent relief if it was requested.
These are the same investors who successfully built portfolios on both equity and cash flow because their investment strategy was laser sharp on what was required to keep building a portfolio. Negative gearing was not part of their strategy.
We can no longer rely on the ‘old way’ to invest where someone gave us a ‘hot tip’ and we bought an investment property because we were told that the hot spot location would mean that the property would double in value every ten years. There’s a vast difference between ‘marketing spruik’ and having a fully focused investment strategy.
There’s no reason why any property investor can’t successfully build a portfolio of properties. It just takes a common sense approach and must involve your Strategy, due diligence to make sure that the property numbers stack up and risk management to ensure there’s an exit plan in place if the worst possible scenario occurs.
Julie Crockett is the CEO and Founder of Australian Property Investment Solutions and the creator of the “Millionaire Property Investor Program”.