Hi All,
With all the doom and gloom around, I thought I would share a way to structure your portfolio which will perform whether the market is falling/flat or booming!
As I have said previously, this is part of my risk mitigation strategy of buying properties with balanced growth and cash flow and tightening expenses.
My portfolio has grow from about $1m to about $5m in about 6 years based on this strategy.
The premise of this strategy is based on the following:
1. Buy in 5 major cities or larger regional (i.e. over 100k in the greater
catchment) metropolitan areas
2. Buy with minimum of 7% yield with a view of increasing this to 9-10% in
2-3 years
3. Buy in areas with infrastructure improvements within 3-5 years
4. Diversify your portfolio around the country - to reduce risk as well as
reduce any land tax liabilities
5. Balance between gorwth and CF - this the only optimum way to continue
to grow your portfolio and your wealth in my opinion without significant risk
Having said that..some of your investments may not always getting growth or cashflow. Unfortunately, this is happening across 2 properties in Qld and 1 in Melbourne (though the CG has been fantastic). But this only represents less than 20% of my portfolio...but my overall portfolio is still CF.
So now down to the nitty gritty of my portfolio:
1. My existing portfolio is geared at an LVR of 37% (would like this to be
34%) this is despite me acquiring 3 properties this year for about 800k
2. The overall portfolio is returning 5.1%
3. The CF+ position once fully let (have 2 vacant due to reno) is around 3k
per month
4. Equity has grown 420% over 6 years
My portfolio is structured in way it will perform whether the market is falling/flat (as it is now) or booming!
How is this possible? Well easy to see property performs in a booming market...so no explanation required. As for falling/stable market...see below...
I believe my portfolio will still perform in falling/flat market as rents and interests drop.
My current IR repayments are about 126k per year. The rents have been stable or slightly dropping in the last year.
Given that IR are about to drop (fixed rates have already dropped)...if my rates drop to an average of 6%....I will say about 30k in interest repayments. Further more I have started increasing rents by 5% which will bring about 7k in additional rent.
So my 36k positve income will become 72k per annum if additional rent and interest reductions are included. If I take 4k for additional increase in costs I am at 68k ...not bad!
Welcome any comments about my assumptions. This theory was tested in the GFC and is now on track to perform in the way....
With all the doom and gloom around, I thought I would share a way to structure your portfolio which will perform whether the market is falling/flat or booming!
As I have said previously, this is part of my risk mitigation strategy of buying properties with balanced growth and cash flow and tightening expenses.
My portfolio has grow from about $1m to about $5m in about 6 years based on this strategy.
The premise of this strategy is based on the following:
1. Buy in 5 major cities or larger regional (i.e. over 100k in the greater
catchment) metropolitan areas
2. Buy with minimum of 7% yield with a view of increasing this to 9-10% in
2-3 years
3. Buy in areas with infrastructure improvements within 3-5 years
4. Diversify your portfolio around the country - to reduce risk as well as
reduce any land tax liabilities
5. Balance between gorwth and CF - this the only optimum way to continue
to grow your portfolio and your wealth in my opinion without significant risk
Having said that..some of your investments may not always getting growth or cashflow. Unfortunately, this is happening across 2 properties in Qld and 1 in Melbourne (though the CG has been fantastic). But this only represents less than 20% of my portfolio...but my overall portfolio is still CF.
So now down to the nitty gritty of my portfolio:
1. My existing portfolio is geared at an LVR of 37% (would like this to be
34%) this is despite me acquiring 3 properties this year for about 800k
2. The overall portfolio is returning 5.1%
3. The CF+ position once fully let (have 2 vacant due to reno) is around 3k
per month
4. Equity has grown 420% over 6 years
My portfolio is structured in way it will perform whether the market is falling/flat (as it is now) or booming!
How is this possible? Well easy to see property performs in a booming market...so no explanation required. As for falling/stable market...see below...
I believe my portfolio will still perform in falling/flat market as rents and interests drop.
My current IR repayments are about 126k per year. The rents have been stable or slightly dropping in the last year.
Given that IR are about to drop (fixed rates have already dropped)...if my rates drop to an average of 6%....I will say about 30k in interest repayments. Further more I have started increasing rents by 5% which will bring about 7k in additional rent.
So my 36k positve income will become 72k per annum if additional rent and interest reductions are included. If I take 4k for additional increase in costs I am at 68k ...not bad!
Welcome any comments about my assumptions. This theory was tested in the GFC and is now on track to perform in the way....