Some property investors often look into selling some of their properties to save up and maintain a "core wealth," but in a financial point of view, what could actually be the best way to maximize hundreds of thousands of cash sitting around?
While putting money into a bank account— whether in high interest savings, term deposits, or other cash investments—may seem like the obvious choice, investors can also use it to offset against the debt on their other properties. Mortgage broker Troy Phillips believes that utilizing offset accounts is a good strategy to improve a property investor's cash flow.
"There's fixed rates now, with a hundred percent offset. So tip it in there, and save yourself some money and improve your cash flow. That's what I'd say... That's the best deal for a property player," he said.
Troy explained: "I'm not saying go and put it into a term deposit at 2.1 per cent with your favourite bank so that they can take margin on it. I'm saying give it back to the bank. If you've got a good fixed rate with a hundred per cent offset, put it in there, and you can redraw it at any other time. You're saving yourself money and you're improving your cash flow. It's a no-brainer."
Aside from minimizing risk, property investors are also providing themselves the chance to capitalize on opportunities once they arise.
Is it the right time to sell?
Financial adviser Tony Caine agrees that putting money in offset accounts is one of the best ways to go once an investor sells his property, but it is also important that one looks back on his own plans before taking this big step in their investment journey.
He said: "Say, 'Well, what's the purpose?" I think it’s important to put a purpose behind a sale or a purchase, and say 'What's my plan in 10, 15, 20 years?' and 'Okay, what's a good time, what's happening in my life, to make it make sense for me to sell that property?' "
"If you don't need the cash, it's all working well, it might sometimes make sense to retain that if it's gonna be long-term... There's always gonna be opportunities. It's a big country with a lot of different markets. That's what I think some people forget. They might be living in a market that's quite hot, and they're panicking. But there's always gonna be opportunities in other markets. I think I wouldn't rush. I'd wait till the perfect time, when you felt you could get a good opportunity, " Tony concluded.
Tune in to Troy Phillips and Tony Caine's episode in The Smart Property Investment Show to know more about the benefits of working with financial mentors, and why they believe that having an entrepreneurial edge and investing in one’s self is the key to investment success.