4 Reasons Why Your Investment Portfolio is Underperforming

November 22, 2016 Sam Saggers

Life can get busy. We’re so involved in our work, our families…day to day life, actually…that we forget to take stock of our property investment goals. Take a minute and ask yourself…am I closer to financial independence this year, or am I just getting by?

When you’ve got cash positive properties it’s easy to assume that your portfolio is moving along fine. After all… you don’t have to empty your back pocket to pay for it, your tenant foots that bill!

But having cash positive properties does not mean you’re making money; it’s capital growth that builds wealth.

Is your investment portfolio delivering the results you need in order to reach your goals? Are you another year closer to financial freedom?

If you’re not sure, then it’s definitely time for a review.

There could be any number of reasons why you’re not getting the results you need…here are 4 of the most common:

 

1.   You don’t have a property investment plan

 

I know you’ve probably heard it before, but having an investment plan makes all the difference. Why?You don’t have a property investment plan

Because a well-crafted investment plan (which should include some cash positive properties) allows you to manage your equity so that you can continue building your portfolio.

Serviceability is key when building your portfolio and cash positive properties can add to that serviceability.

When your serviceability remains strong through smart investment strategies you’re always in a position to make good decisions, based on the numbers, not emotion.

In other words, you’ll be proactive, rather than reactive, automatically putting you in the driver’s seat.

 

2.   Your serviceability is impaired because you’ve set up the wrong structures.

 

Your structures have a direct impact on your ability to obtain more financing, including the loan amount you’re approved for and the terms extended to you.

If you need capital (or cash positive properties) to offset a negatively geared property, it’s easier to obtain financing if you’ve taken title as an individual, rather than as a company.

Why?

Because, all around, it’s much simpler to get at your equity if your mortgages are in your individual name than in a trust or a corporation.

Now granted, there may be times you need title in a company, trust name, etc., but it’s important to understand the strategy behind your choice of structure…especially in terms of your ability to obtain finance.

Once you learn the pros and cons of each structure you won’t get caught short on equity again due to poor choice of structure.

 

3.   You’ve simply got the wrong property You’ve simply got the wrong property

 

It happens. Sometimes you buy in what you think is a growth location, but either you bought at the wrong time in the market cycle (paying too much) or the property itself is a dud.

Depending upon your own individual situation you can choose to either hold onto the property or sell.

If you choose to keep the property, renovation could help improve your returns, or at least put you in the position to improve the yields once the market turns back around. But, whatever you choose to do, base your decision on the maths, not your emotions.

 

4.   You’ve failed to review your portfolio on a regular basis

 

If you’re not reviewing your property portfolio regularly, you could be missing key opportunities to do something about properties that aren’t performing or which are performing below their potential.

For example, if your property is an older home could you improve your yields by renovating (when the market’s right), commanding higher rents and subsequent increase in value?

Or perhaps you’ve got a lot of equity sitting in a property that you’ve held for years. The suburb sits at the top of the market…you can choose to recapture some of your equity through either refinancing or selling. If you don’t do this routinely, you stand the chance of losing out.

 

More great tips? Book a FREE consultation with one of our coaches!

 

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