In the process of growing his 18-property portfolio, Smart Property Investment’s Phil Tarrant and his team deals with the repercussions of a minor mistake on the management of his portfolio, including a significant hit on their cash flow. Find out how to avoid costly oversights that could mean as much as an additional $10,000 in repayments.
In order to minimise costs, Mr Tarrant and his mortgage broker set up a professional discount package for interest rates on six of his home loans in one particular bank, which cost them $300 in annual subscription fee. To manage the regular payments, they also set up a separate account specifically for the purpose of paying for the said fee.
This well-planned setup worked well in helping them manage finances until just recently when the team failed to notice that the account didn’t have the necessary funds to pay for the fee. At the time when the bank should be taking the fee out of the dedicated account, it only had $250 instead of the required $300.
As a result, the interest rates for all of the six loans went up by 1.5 per cent, which significantly increased the mortgage repayments they have to make.
According to Michael Johnson, Mr Tarrant’s portfolio admin officer: “We had to do some diagnostics and some troubleshooting with our mortgage broker Ross. We had to go through all the processes to try to get it reset.”
As silly as it seems, this oversight highlighted the importance of getting the small things right, he said.
“These small things all add up. If you're not paying attention to the small things, like making sure particular payments are paid on time or rates are cancelled on time or discounts are accessed, that can make your portfolio cost a lot more than it needs to,” Mr Johnson highlighted.
Managing a portfolio with 18 real estate assets spread across Australia is no small feat, according to Mr Tarrant, but it’s usually the ‘little moving parts’ that catch him and his team off guard.
In the past, a small fee that was left unpaid also put a dent on their cash flow as it cost them a total of nearly $10,000 more in interest repayments on a single $1.1 million-property in Sydney until the discount package was reset—nearly $200 a week in rent.
These recent slip-ups reminded Mr Tarrant and his team to pay closer attention to every process that keeps the portfolio growing, no matter how small or mundane.
According to his buyer’s agent Steve Waters: “You need to invest the time. I understand Phil has got a big business to run and there's a lot more than a property portfolio to look after so it's pretty easy to be forgotten about or overlooked, but I would guarantee that there are hundreds, if not thousands, of investors that have fallen into the same trap and cost themselves a lot of money.”
Banks and lenders work under different rules and regulations and investors need to learn how to play by them in order to avoid having to spend more time and money than necessary.
If the same issue was encountered by someone who is just starting out, with only one to two properties, an extra $10,000 in repayments may significantly delay their wealth-creation journey.
Pay attention to the paperworks, get in touch with your lenders and discuss your strategies regularly with your team of professionals to able to maintain a strong foundation for portfolio management.
At the end of the day, the ‘little things’ in your portfolio could result in bigger financial issues, which is why experts strongly advise investors to ensure checks and balances.
Be an active participant in the management of your portfolio, no matter how big a team you got backing you up.
“It’s simple—it’s poor management of portfolio. The good lesson there is to be a little bit more diligent around the rules and regulations and the tips and traps to get the small things right. It should be high on your agenda,” Mr Waters concluded.
Tune in to Phil Tarrant’s latest property update to find out how good portfolio management can help you fasttrack your way towards the achievement of your goals.