Over the years, accountant Michael Johnson has serviced seasoned property investors, doing the “heavy lifting” for portfolios with more than 10 properties. Find out his top three tips for success in property investment.
Smart Property Investment’s Phil Tarrant credits Mr Johnson for helping him manage his extensive portfolio throughout his wealth-creation journey – establishing a sturdy process to keep the portfolio afloat despite the unpredictability of the markets.
“Every single one of the properties that we’ve purchased, we’ve purchased for a reason,” Mr Johnson said.
“There’s always lot of potential. You can look at the price lines and say, ‘This moved from this to this... would’ve made this amount of money,’ but there’s a reason behind every single one of the purchases.”
Mr Johnson shares the three secrets to success that he has learned while managing Mr Tarrant’s massive portfolio:
Years of working with Mr Tarrant have allowed Mr Johnson to appreciate the value of having a solid financial team. By engaging professionals, he believes that every investor will be equipped to make the best decisions for their portfolio over the long term.
“I want someone who has the knowledge, skills and years of experience learning about the macro and micro-economic factors that occur within a region or within a street,” the accountant said.
Pigeon pairing, a term coined by Right Property Group’s Victor Kumar, basically means picking a high capital property and “pairing” it with a high-yield asset.
In order to realise their properties’ full potential for wealth creation, property investors typically aim to achieve high capital growth while also minimising the cost of holding their assets through the years as they grow in value.
According to Mr Johnson: “I think pigeon pairing is really important so you can try and net out everything. If you can find some good yielding properties that add positive cash flow to offset negative cash flow, you might have a neutral position and, hopefully, both cap in value.”
Finally, Mr Johnson highlighted the importance of financial education in property investment as it could very well be one of the biggest financial commitments that anyone could make in a lifetime.
Budding property investors are advised to learn about budgeting as it will allow them to set a clear goal right at the beginning of their wealth-creation journey.
The accountant reminds investors that, while saving money sounds easy for some, doing it for no apparent reason could be a miserable task. On the other hand, when they have a goal and the time comes that they achieve it, it becomes a rather gratifying experience.
“What I’ve done, personally, to set that goal is I’ve worked out my own personal budget and how much I’m spending on rent or whatever else and compile it into the one spreadsheet. My background is in accounting, so I love an Excel spreadsheet,” Mr Johnson said.
“Basically, I worked out if I saved x amount: What does that work out into a year and a half’s time? How do I go about purchasing that property? There’s a bunch of elements [that] go into that, but if you know these things, you can set that goal.”