Investment tip: The true indicator of a portfolio’s performance

Every investor has different ways of tracking the progress of their property portfolio, but experts deem two simple financial metrics as the most important indicators of an asset’s performance.

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For a lot of investors, portfolio management, or ‘monitoring the numbers’, is as valuable a process as picking the right investment area, the perfect property and the best home loan package.

However, considering the myriad of metrics that are involved in growing a property portfolio, it could be daunting to keep track of every single number that is relevant to each asset—from mortgage repayments, ongoing expenses, interest rates and loan-to-value ratio (LVR) to yield, cash flow, capital growth and tax implications.

One of the ways through which investors monitor the performance of their asset is by crafting a spreadsheet detailing every numerical factor that influences the growth of their portfolio.

What exactly do these spreadsheets contain?


According to experts, there is no one formula for every investment property, even if they are in the same portfolio. Ultimately, investors should aim to get the ‘real picture’ instead of the ideal numbers.

Propertyology’s Simon Pressley said: “The metrics depend on whatever the individual's comfortable with because the numbers are for you. It's not like there's a legal requirement for you to complete any spreadsheet. It is prudent, however, to monitor what you've done and have a record somewhere so you can monitor how everything’s tracking. The simplest way to do that is a spreadsheet.”

“Put whatever information in there that interests you. If you're a really analytical person you'll create formulas for all of these scenarios. It doesn't mean that you have to, though,” he highlighted.

As a property strategist, he strongly advised investors to consider the changes that need to be applied in calculations through the years.

For instance, when calculating yield, he said: “If you bought a $400,000-property today, it could be rented for $400 a week and you can work at the gross yield today. But in a few years’ time, the value of the property might change and the rent might increase to $420. That affects how you calculate the yield.”

Cash flow

At the end of the day, investors are monitoring the numbers in order to identify their true financial position and ultimately determine their potential to invest again.

Apart from yield, the annual cash flow provides a good view of a portfolio’s performance, as long as the investor factors in every number relevant to the asset—from the highest earning to the lowest expense. Having a grasp on how much exactly is coming in and out of your wallet can make way for better investment planning in the future.

Mr Pressley explained: “Understanding your current loan-to-value ratio based on the estimated current value of assets and current loan balances, that's important. Yes, the yield is important, but that's just a percentage, and a percentage doesn't come out of your wallet.”

“What does actually come out of your wallet before tax, that’s important to put that in there. Cash at bank is the true indicator of the performance of a portfolio,” the property strategist said.

End goal

Ultimately, there is no right or wrong way to craft a spreadsheet that monitors your property portfolio’s performance because it will depend on your goals, capabilities and limitation as an investor, as well as the factors that affect the growth of your asset, including interest rates and tax implications.

At the end of the day, your spreadsheet must help you understand your true financial position as well as your investment potential and the different ways you can maximise it.

“Am I under stress or have I got some room to play? Should I sit on my hands or can I ratchet it up a little bit and maybe secure some more properties? That's the purpose of doing this Putting a spreadsheet together is simply a tool to understand where you are and help you get where you’re going,” Mr Pressley concluded.


Tune in to Simon Pressley's Q&A episode on the Smart Property Investment Show to know more about the numbers that you need to be keeping track of in order to best manage your portfolio. 

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