Strategy, not economic factors, dictates portfolio growth

He said investors should be buoyed by the fact that market activity was rarely uniform, and that when one region slowed, another often picked up the pace.

“The most common thing that I see when investors don’t get it right from a theoretical standpoint is that they use this ‘one point equals all’ approach,” Paliwal said.

“They forget that it isn’t just one singular metric that controls everything.”

For investors looking to strengthen their ability to grow their wealth, Paliwal said they needed to look beyond macroeconomic noise and focus on specific, actionable strategies.

“The difference between where you are today and using property to get to a goal you have in life is really the micro decisions you make.”

“That is the biggest thing, when I think of people making these future-based decisions, that they’ve really got to lock in on.”

The variables that dictate portfolio scale

Paliwal said investors were often misinformed about how much certain factors, such as credit limits and living expenses, constrained their ability to grow their portfolios.

“Borrowing capacity is a game of variables, and the person with the most variables available to them has the most chance of achieving their goals.”

“The first thing is that when you recognise that these are all possible factors, is to get educated on them.”

Paliwal said he had never seen a greater desire among buyers to enter the market, and even to consider options they would not have just a few years ago.

Investors who had previously preferred to operate only through the big four banks were looking to utilise alternative methods, such as borrowing outside the major banks, according to Paliwal.

Additionally, he said more investors were considering purchasing through a self-managed super fund or trust.

“We are in this time of borrowing power and innovation.”

“The good sign is that people are looking out for ways to grow their wealth and their financial future.”

“The bad sign is that if it requires this much movement or innovation for people to build wealth, it’s not a good place for long-term affordability.”

Property is the tool, not the plan

According to Paliwal, a common mistake investors made was assuming that property was the strategy for wealth generation, rather than seeing it as a tool.

“Strategy is so much more than just a tool.”

As part of a retirement strategy, Paliwal said investors could consider pivoting from residential to commercial assets, but they need to understand that different factors drive each market.

He said the most common age range to begin their journey in commercial property was 50–60, with younger investors more willing to take on larger amounts of debt.

Paliwal said commercial property would likely continue to grow in popularity as more residential assets are realised by investors and the aging population prioritises income over equity growth.

The appeal of having a reliable income stream has played a large role in the growing interest in the commercial property market, according to Paliwal.

He said that the signs indicating a property was low-risk varied greatly between residential and commercial properties, and that investors considering the jump needed to fully commit to the plan.

“To bridge the gap from resi to commercial, investors dip their toes in, and that’s the wrong way to go about it.”

“You need to go at it really hard,” Paliwal concluded.

Listen to the whole episode here.

Tags:

• Growth
• portfolio
• investor strategy

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