MODERN INVESTING
Then test this goal to ensure it
is reasonable given your current
situation and doesn’t require too
much risk.
Step 2: The Strategy
After deciding on your income
objective, work out what value of
properties you require to generate
this. For example, a reasonable
mix of types of properties will get
an overall return of approximately
5% p.a. from your properties after
owning them for a few years.
Using the $40,000 return objective
therefore requires $800,000 of
properties after mortgages to
generate this return ($800,000 x
5%). Then, there are only three
things you need to do to succeed:
1. Plan, buy and hold for the long
term
Although we talk about a 10-year
plan, it effectively becomes a
lifelong property investment plan
with exit strategies added in for
your circumstances and objectives.
Each property should be purchased
for a minimum of 10 years and,
preferably, longer.
2. Buy right and consistently
Focus on buying good investment
properties that fit your objectives
in good areas at the right price.
We cannot predict the short-term
direction of the property market;
however, over a 10-year timeframe,
you’ll likely see two to three
cycles in the market. If you buy at
consistent timing intervals, you’ll
buy across these cycles without
needing to predict or worry about
short-term market direction. Here, I
often recommend clients consider
engaging a good buyer’s advocate,
especially when starting out in
property investment.
3. Get the financing structure right
upfront
Structure the finance to fit your
long-term plan and don’t take a oneproperty-at-a-time view.
Sometimes this might mean
you don’t always get the
cheapest interest rate as lender
diversification and product
features may be more important
to facilitate the plan. However, you
also won’t get stuck like the 90% of
investors who only have one or two
investment properties. This often
happens because they run into debt
servicing constraints because the
loans have not been set up properly.
Step 3: Ongoing
progress review
It’s really important to review
progress with your advisers.
Schedule a review every six months
to ensure the strategy is on track,
and to adjust for any changes in
circumstances. Consider revaluing
the portfolio revalued to free up
more equity and continue the plan.
If you treat your investment strategy
with the importance it deserves and
stick to it, you’ll be well rewarded
down the track. As long as you have
a solid plan then there is no need
to try to ‘time’ the market. Nobody
really knows where it is going next
and trying to do this can be very
expensive. Just buy consistently
according to your plan and reap the
financial rewards in the long term.
Tim Boyle from Finalytics Financial is a
chartered accountant, mortgage credit
adviser and active property investor.
He has over 20 years’ experience in
finance, accounting and consulting, and
specialises in property finance. Visit
www.finfin.com.au or email tim.boyle@
finfin.com.au
February 2016
ModernBusiness
37