Making the tough decisions at the start of 2016 for one's property portfolio

Property Portfolio Assessment Framework

The best way to uncover an underperforming asset before it eats too far into your bottom line is to annually review your portfolio and ask yourself some hard questions:

1.Is this property performing like I expected it to?
2.Is this property outperforming the market?
3.If this property were on the market today, would I buy it again?
4.Is there anything I could do to improve my property to enable a more attractive return on my investment?
5.Is this property likely to outperform the market averages for the next decade or more?

I am biting the bullet and going to liquidate the two lemons sold to us when we were green investors by a 'property advisor'...the rest of the portfolio is doing well (the latter from our own research and choices after discovering Somersoft)...need to move our money from those two IPs elsewhere to make the $'s work

 

How many years of 'no' on the above questions until you need to decide to pull the plug? E.g. would 2-3 years too short to see anything?

 

It's a great reminder guys - thanks.

 

I would be interested in details of the properties if you feel comfortable disclosing.

 

Great post @DiligentPM

As property managers on the ground, with most investors interstate, our annual reports hopefully help with these decisions. Getting a better return out of your property is a win-win.

 

great post guys
we have reduced debt too to minimise exposure.

 

Great post.

Another tough decision imo is to review yourself as your biggest asset and take stock of the people around you and cut back contact or eliminate completely the ones that are having a negative impact on your progress and journey. (Family is a tough one to completely eliminate but other people eg friends, acquaintances etc. I've always believed its quality people around you thats important not quantity.

Just my opinion.

 

Interesting point Leo. Could you give an example of one of these people in your life. I know plenty of my friends aren't into the property thing but it has no effect on my work or the friendships. Not being a smart ass just interested in your view.

 

Here is my moment of vulnerability disclosing our lemons however given it may benefit learning here we go...

Cairns - three bedroom, two bathroom, two garage townhouse 300 from Clifton Beach...no issue with sourcing tenants however NEG growth (worth less 9 years after purchase price....forget waiting out the 7 year growth cycle, realistically cycles are much longer now) and big lesson learnt is 'property advisors sell overpriced property interstate do purchasers are not fully across value as locals would never have bought it). We are hit less than others as we negotiated the developer down $20 k on asking price ...rental guarantee is built into over inflated asking price and run if ever offered one as it means the developer knows the yield won't stack up at market value. The developer UDO went broke so after 3 months wham gone is the rental guarantee followed by obtaining rent at $25/week less and us only getting back to original rent a year ago...remember depreciation is now almost gone so not offset by higher rental yields

Gracemere...House and land on 900m2 corner block. Four bedder...These guys spruiked that the houses would double in value to hit a million dollars within seven years from 2009...uhmm even then we thought it nonsense however thought we would achieve a 7% per annum growth as infrastructure was much broader than a high risk mining town...Fortunately the original tenants are still in place so no rental losses ...huge risk if a vacancy occurred now due to over supply from over enthusiastic (kind words) developers.

Rest of our portfolio is good as no involvement from property advisors...IPS in owner occupier areas and not new

 

Excellent question....our lesson was fear of crystalising our loss stopped us...
reframe: crystalise the loss and move your money elsewhere or the opportunity cost amplifies each year

 

This is a very timely! I asked these questions at about 3-4pm today.

1. NO. Seven years ago I paid what the bank valued it at last week.
2. NO.
3. NO. There are other properties I could buy now at the same price.
4. This is a hard one... after discussion with town planners and real estate agents, the margins probably aren't there. Talking to my broker also helped clarify my stance (above and beyond )
5. NO.

Easy decision huh? I left a message with the agent at 5 that I wanted to list it for sale.

 

Congratulations...I can only imagine the sense of relief we will experience when we sell