How property investors can 'de-risk' themselves
Mortgage broker Troy Phillips, unlike most investors, think twice about the good ol' buy-and-hold strategy in property investment.
According to Troy, property investors who have large portfolios full of equity should consider getting some money off the table and taking some time off from the markets for a while. After all, as one of his early mentors advised, one must never go broke taking a profit.
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"I think properties had a great run. As a young man, I played the share market, and I always waited for that next 10, 15 cents... I think, at the moment, a lot of people are sitting on a fair bit of equity and a fair bit of profit," he told Smart Property Investment.
"I think if there's areas where they think it could be toppy and they can take some money off the tail and reduce some debt, now's the time to do that.
"Take a bit of cheap fixed debt if you haven't already. You missed the bottom of that market, but you should be looking at some cheap debt. You should be looking at deleveraging a bit... I just think that taking a profit is never a bad thing. It's better than taking a loss—doesn't leave a sour taste in your mouth."
In order to reduce debt exposure, Troy suggests selling a number of properties, but this then leaves investors with the question of what to do with the money.
"There's a thing called core wealth. Talk to an [adviser], or someone you trust, and look at how you are going to put your core wealth away," he said.
"You get to the edge of 40, 45, and you don't want to keep taking risks. This is how I sort of live my life. You want to pack some money away—that's your core wealth—and you want to have some money where you can have a play again in the property market... There's always going to be opportunities in other states."
Similar to what most successful property investors often say, the mortgage broker believes that a good strategy is what drives investors to success, not the number of properties in a portfolio.
"You're not gonna get a great return on interest rates, but you're gonna take some cash, and you're gonna have some ammo, or as I always say, have a bit of powder in you, because something could come up," he explained.
"There could be another business opportunity. There could be another form of asset, you know... there could be other forms of property assets that you can get into.
"So just have a bit of powder, dry it. When the banks start to tighten up their lending, that's when property might come back a bit. Then you can jump in again."
"It's a real process of de-risking yourself, but also giving yourself bandwidth to capitalise on opportunities if and when they arise," Smart Property Investment's Phil Tarrant concluded.
Tune in to Troy Phillips and Tony Caine's episode in The Smart Property Investment Show to know more about the benefits to working with financial mentors, the ways in which investors can channel their sales profits and leverage their debt, and why they believe that having an entrepreneurial edge and investing in one’s self is the key to investment success.
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