What makes a property investor successful? Aussie Parramatta’s Ross Le Quesne lists down five habits of investors who have built impressive portfolios with more than 10 properties.
Years of working as a mortgage broker dealing mostly with owner-occupied properties, Mr Le Quesne has had the privilege of servicing investors who have acquired as much as 50 properties over the course of their wealth-creation journey.
What are the habits that differentiate investors with massive portfolios from those who have only succeeded in purchasing and maintaining a couple of investment properties?
Successful investors, first and foremost, familiarise themselves with the most basic fundamentals of investing in properties, according to Mr Le Quesne.
“It comes down to your ability to hold the property, which comes down to cash flow,” he said.
By knowing the do’s and don’ts, as well as the factors that influence growth, investors are likely to succeed in asset selection, which is deemed as one of the most critical parts of the investment process.
Mr Le Quesne said: “You can have one property that takes all your negative cash flow or you can have 10 properties that takes that same amount of negative cash flow – it is one of the fundamentals.”
“That’s a leveraging get off smart cash flow management.”
To be able to maintain cash flow, investors are advised to be wary of their rental yield.
Striking a good balance between the two is one of the most important secrets to success in the business of creating wealth through property, the mortgage broker highlighted.
“Successful investors understand how much negative cash flow they can afford from a month-to-month basis, and they balance that,” he said.
Since getting finance for property investment has become harder due to several socioeconomic factors, smart investors always make it a point to “strategise” in order to maintain good serviceability and borrowing capacity.
“They’ll take on strategies like ‘Where in my portfolio can I add a granny flat that’s going to increase my cash flow and increase my serviceability?’” according to Mr Le Quesne.
“They’ll look at it from a strategic point of view and think differently around that so that you can look after your cash flow.”
Therefore, he strongly encouraged investors to be active participants in their journey, as in manage and review their rents and finances on a regular basis with the help of professionals, where appropriate.
They should also pay attention to interest rates, which could be volatile and ultimately influence the cost of maintaining the property and fulfilling loan obligations.
Mr Le Quesne advised “shopping around” for the right lender in order to maximise finances.
“You might be paying 5 per cent on your interest-only investment loan, but with that same lender, you can get a fixed rate at 4.2 per cent. What’s the difference of a 0.8 per cent over $1 million on your portfolio? It’s $8,000 a year in cash flow,” he said.
“Successful investors are looking at things like that to really manage their cash flow… We say ‘cash flow is king’. It’s about having those buffers.”
Successful investors don’t just stick to one strategy because they know that there is no such thing as a “foolproof strategy” in a venture as unpredictable as property investment.
In fact, focusing on just one strategy can limit the opportunities you get on the field, according to Mr Le Quesne.
Instead, investors should strive to be open about the ever-changing situation in the market – analyse it based on their goals, capabilities and limitations as an investor and take a long-term view when making financial decisions.
According to the mortgage broker: “Looking at the bigger picture [is important] as well. Sometimes, people are focused on ‘I only want to deal with a big four bank’, which limits their ability to grow a portfolio.”
“The asset selection around cash flow and having all these other factors in to really managing your cash flow to hold property long term [are] really important.”
Finally, successful property investors will attest to the incredible value added by a dependable financial team to their portfolio.
A team of buyer’s agents, accountants, and other property professionals help them assess their goals and determine the next best step to take in order to achieve them.
“We sort of look at where you’re going and what you’re doing, and I think that’s key. The mistakes that the not-so-good investors make is simply buying the wrong property,” Mr Le Quesne concluded.