It's the portfolio $$$ that counts not the number of properties

Who cares where/what your IPs are. If they are bringing in the $$$ and you have a strategy that is working it doesn't matter!

Your friend sounds envious of your financial position

 

Like this kind of Exit Strategies, sounds more practical and tax efficient too.

 

Great reminder ! Thanks a lot for sharing!

 

Getting back to why we are investing the end goal of course - financial freedom.

Why are the numbers of properties for some investors more important than the cash flow?

What are the alternatives?



MTR

 

Because you might not get the same cashflow from one property worth $XXM?
Obviously better to not have all of your eggs in one basket?
Was that a rhetorical question?

 

I think it's also reinforcement - the vast majority only get to 1xIP, even smaller 2xIP, so then mental gymnastics is pretty basic: 1 is a start, 2 already means you're above the pack, 15 must mean you're amazing. Of course it doesn't work like that in reality, but there's always a disconnect between reality and what the brain makes it out to be (Descartes among many).

 

MTR...cash flow is important agreed but so is the diversification of income. I have seen people buy in one regional town...and get into trouble when the market changes.

 

Imagine having 20 properties and each one gives you no end of grief when you could have 10 quality properties which you never hear a complaint from the tenant, the inspection report is detailed and no issues, no maintenance issues and rental payment comes into your account without fail. Seems like more work and defeats the purpose of having your financial freedom and independence.

 

That's just an assumption. quality properties can become poor quality if not maintained and tenants not screened diligently.

 

Fortunately my managing agent is second to none. I trust their work and they keep me in the loop with things too.

 

Providing all the properties are not bottom of the barrel I don't think it works like that in reality unless your talking about new builds which require little maintenance.
Quality properties still suffer wear and tear, need new fences, blinds, new a/c units etc etc.
One of our most expensive IPs 5km from the CBD in Brisbane has a tenant who constantly struggles to keep his rental payments up to date.
Spend no money and rarely hear from your pm and then visit an IP for the first time in years, they can become run down and unloved over time.
It can be a sobering experience until you think about the CG regardless.

 

i think it can come down to the tenant and their personality irrespective of suburb however target demographics in areas were the demographics are poorer u get into issues with non-payment of rent (and then tribunal etc) - Some tenants won't even call you the whole year and some will nibble at every single thing. Recently pest complaint (was asked to pay for pest treatment - said no as it was more than 6 months, i'm not responsible for lack of hygenic living habits).

 

Managing a portfolio is a business. All businesses have issues and challenges from time to time. It's normal and expected. I often hear 'quality' property as opposed to something else. But really every acquisition should be a 'quality' deal otherwise it's not worth adding it to your portfolio. Imo a property shouldn't be labeled 'quality' or not by the amount of maintenence it has or doesnt have, but rather the overall benefits/profits the acquisition yields and will yield.

Just my opinion.

 

I think people use the world quality as it a lot easier than 'blue-chip'.

You can buy quality shares/blue chip shares, doesn't mean these shares will perform better overall but rather there is less perceived risk with them.

 

Agree with you. Personally i don't believe in 'blue chip' or not. Eigher the acquisition is good or not. Just my opinion.

 

There's a lot of assumptions going on here.

I can tell you there is hardly any work involved with this many properties, and as some here will tell you, I'm the slum lord queen.

As Leo said, having a portfolio is a Business, so you should treat it as such. This means keeping them well maintained, the rents at market rates, using the services of a good PM (unless you self manage & you are efficient at all aspects of this). A lot of the tenant issues that I hear about are really non-issues. For instance "the tenant wants x". Great! Now you need to ascertain is this maintenance, if so, then YES, it gets done, no question. If it isn't, it's just the tenant asking for something extra, and it's not something that I want/need to do, then it's usually No.

I've had tenants ask for all kinds of stuff, it doesn't mean that they will get it. Some LLs seem to think that just because a tenant wants something, they have to provide it. Well, you don't! AND....sometimes you just create a problem by giving them what they want, because they then see you as an easy touch.

The same with maintenance. There is real maintenance, and tenant created maintenance. For instance, plumbing! Tenant whinges that the drains blocked. Great, I'll call in a plumber, but I always let them know that if the blockage has been created BY THEM (pads etc down the toilet), they will get the bill. The tenant soon learns not to do it, because it costs THEM money.

I had another that got the agent to get a tradesman out because their hot water wasn't working. It WAS working, but was only a small unit. Sufficient for the 2 bed unit it is located in.....but the tenant obviously likes very long hot showers. I made the tenant pay, because there was no issue. There was a hot water unit and it was in good working condition. Guess what? Tenant hasn't complained about anything since.

 

To each to their own, but with my properties I have heaps of maintenance work come up due to the age of the properties (excess of 65 years) and for me I like to have it on a more manageable level due to my work and studies. Not saying it's for everyone, but this is my own circumstances which may not apply to others.

 

What are the thoughts now with the most recent changes by the lenders?

Cheaper properties have better returns so it may enable you to hold more both from servicing and holding cost perspectives. Though lenders do cap the rental yield so is it really going to help people accumulate more?

How has your strategy tweaked to cater for the changes? Especially those who are starting out now?

 

Hardly rocket science though, some have been successfully doing this for a while.

 

You mean post APRA?

I understand you started well before that. Would be great if you shared how you've navigated through it.