Secrets to building a $12-million portfolio: Lloyd Edge
Investor Lloyd Edge has successfully built an 18-strong property portfolio with assets spread across three states, now v...
Accountant Michael Johnson, at 22, is already “doing the heavy lifting” for the management of Momentum Media’s Alex Whitlock's and Phil Tarrant's successful 17-property portfolio—a journey that has taught him the value of communication, good education, and the right mentorship.
Aside from the young accountant, Phil and Alex also recognises the value of their reliable financial team, which consists of mortgage brokers, property managers, buyer’s agents, and more.
According to Alex: “I'm something of a passenger in the portfolio these days.”
“There's nothing wrong being a passenger because if you get the right people behind you to help drive a portfolio, you can get the benefits from it,” Phil added.
While managing a large portfolio could be overwhelming at times, establishing a streamlined process has helped the team drive the journey towards success.
Find out how the property investors and their financial team developed an efficient and effective way to build a property portfolio, as well as how they plan to continue growing it in the future:
What’s the most important part of managing a large portfolio?
Alex Whitlock: [We made sure to have] transparency around this. We want to have in detail every single transaction, every single element to the portfolio ... It is a complex process but it's also something that has grown organically because we set the infrastructure up … from the first property. I remember [Phil] working on an Excel spreadsheet, which still exists now … It's become very scalable.
Young as you are, what has been your function as part of the team?
Michael Johnson: A lot of the time, it's obviously management stuff with the property managers … maintenance, that sort of thing. And ... if we're, say, moving into a new acquisition, it'll be dealing with the broker.
It's relatively passive for me, personally, because we do have all the heavy lifting done by all the property managers. It might be coming to [Phil and Alex] and say, "Hey guys, what do you think about this? Should we be doing this? Should we paint the walls here?"
How has transparency helped with the management of the portfolio?
Alex Whitlock: Phil's pretty hands-on with the portfolio. [He’s] got the systems set up … [and] it gives you visibility … on whether interest rates are out of sync [and other factors that might affect the portfolio’s growth].
Do you have one ‘secret’ for being an effective part of the team?
Michael Johnson: One of the key things, I think, for any sort of portfolio is cash flow … There's a lot of hidden costs that people don't realise you have to pay for … One of these things that Phil and I have built into our way of processing things is keeping an eye on cash flow and say … ‘How much does it cost us to hold these properties?’ It might be a cost per week, it might be a cost per month, however you want to look at it … [Make] sure you have every single costs allocated to something so, that way, you know how much it's costing you.
For example, counsel rates or water rates. We'll go [and] reach out to the counsel every year and [say] … ‘How much is it going to cost me this year?’ and we'll make sure we filter that in … We have all this information built in then we look at a dashboard. I can say … ‘Hey guys, it's going to cost us x amount of dollars per month to hold this, so we need to make sure we have this amount of money in our bank account so it doesn't get overdrawn.’
What is the portfolio’s value as of now?
Phil Tarrant: About $7 million with $3 million to $4 million ... in equity, which is not too bad … It'll be asseted about 67 per cent in terms of holding costs—it costs a little bit a year.
Do you get overwhelmed by the size of the portfolio?
Michael Johnson: [It’s] really not too difficult once you have the systems in place, and the systems I walked into that Phil set up [is] pretty seamless.
Tune in to Michael Johnson and Alex Whitlock’s episode on The Smart Property Investment Show to know more about the day-to-day operations of an 17-property portfolio, as well as the impact property managers have had in steering property investment journeys into success.