Shock horror! But buying property doesn’t necessarily mean you’ll be making money, as some might think.
I’m forever repeating these words to budding investors who think that because they’re about to sink their teeth into the real estate market, they’re going to millionaires in a few years.
I hate to break it to you, but the property landscape has changed.
In days gone by, building up a real estate portfolio was relatively easy.
Properties were sub-$200K and the banks would practically throw money at you, no matter who you were. Remember those low-doc and no-doc loans? Oh yes, I do!
Nowadays, the royal commission has stepped in to regulate lenders, and money is harder to get your hands on, not to mention a heck of a lot more expensive! Sure, interest rates are at their lowest, but these days, you’re not borrowing $80,000. It’s more like $800,000!
A cheap property was $60K.
Now a cheap property is $500K.
Depending on where you buy that is, but what’s left to be said for the real estate market is that all in all, property investment is not as simple and easy as what it used to be.
No matter how much that spruiker wants to argue with me, I know this to be true.
What’s even more important to consider is how you get OUT of a property if you need to, hence the title of this article.
When I buy for a client, no matter what the Brief is or how set in stone their plans are for the investment, I am ALWAYS mindful of a Plan B.
Let’s be honest. Life changes. Unexpectedly in some cases, and as a property investor who is serious about building wealth, you NEED to consider what might be your “get out of jail free” card, as I like to call it.
If things were to change for you and you HAD to sell one, or even all of your properties, what would you do?
What is your Plan B?
If you don’t know, then you better listen up.
When I separated from my former partner a few years back, we were forced to liquidate our assets at a time that probably wasn’t the best.
Without getting into the nitty gritty details of my separation, when the dust had settled from dividing / selling assets, I realised it was the property assets that had held their own in the sell-off.
Thankfully, the properties we had at the time were easily sellable in the market, and for more than what we had purchased for. Phew!
Seemingly, I have a knack for buying properties that don’t fall in value, and this rang true when I was forced to implement my own Plan B following a separation I didn’t see coming.
As I said, things change, unexpected circumstances happen and if you own property, you might get caught in the line of fire, especially since this asset class is the LEAST LIQUID of most.
Here’s what you need to consider when building your portfolio.
- If I HAD to sell quickly, what could I likely get for the property if the market was slow?
- What are my exit costs? In other words, how much sales commission, legal fees, etc would I be up for if I had to sell? Oh, and don’t forget those emotional fees! How much ANGUISH would I have to go through and would this put me out of action and for how long?
- How much in cash reserves do I have if things suddenly went south?
- What would it take / cost if I had to start again and build ANOTHER portfolio from scratch?
- Is the legal entity / structure of my investments setup in a way that would cause the least amount of pain if I had to sell?
- How would a temporary or permanent loss of income affect the investment portfolio?
- What insurances do I have in place to protect my investments?
This list is by all means not exhaustive but you get where I’m headed.
A lot of savvy investors approach me about strategy when it comes to property investment and these are just some of things I raise and discuss in our meetings.
If you’re considering investing in property, and need a third party professional sounding board to run over a strategy with you, my Professional Consultancy service might help you put your house in order BEFORE you begin, or hit go on that next investment.
You book a session with me by completing your details HERE, or find out more about what is covered in this service.
