A close look at your portfolio is an absolutely crucial stage in achieving financial freedom and investment success, and it shouldn't take you too long to put in some quick fixes to either find some equity or boost your rent.
While many investors are aware that it’s worth reviewing their properties on a regular basis, it’s rare that there are tools with which to do this.
Emphasizing the importance of this step, chief innovation officer of equities and margin lending for the Commonwealth Bank of Australia, Lisa Frazier, told Smart Property Investment that their new MyWealth platform is going to launch a new tool to undertake this step in the future.
“To begin with the health check tools are focused on equities diversification and concentration and property rental yields. Others such as goal setting are also in the pipeline. Customers talked to us about guiding their decisions and helping them identify ways to optimize their portfolio so that they can more easily check their portfolio (beyond the total value),” Ms Frazier noted.
Property Investment Professionals of Australia chair, Ben Kingsley, explains that when it comes to property investing most investors have a very one dimensional outlook, just asking ‘What is the next best property to buy?’. Instead, you need to “start unpacking that,” he explains, “You need to be asking ‘what does that property need to do for you from an income point of view’ and how does it create that passive income, or create that overall wealth outcome for you.”
Reviewing your portfolio is one way to start understanding how a property will fit into your overall goal.
“We say to our clients that we want to talk about your property strategy every year and obviously re-evaluate how the performance of the existing properties are going and work out what is needed further to get you to your end goal,” he says.
Changes in life circumstance may also require a portfolio review. When looking to review your portfolio, consider the following elements:
- Obtaining new valuations on your properties (if you believe they may have experienced growth, or if there have been any improvements). Have a look at growth via RP Data and seek some comparable sales online before paying for a professional valuation.
- Assessing your rental income, and whether your weekly rent can be increased. Speaking to your property manager should help answer this question, as would looking at comparable rents online.
- Check your recent inspection reports and discuss with your property manager any renovations that can help boost your rental income.
- Check your portfolio’s overall downfalls – is it a strain on your finances? Are you too heavily negatively geared? What are your biggest costs?
- Ensure the properties are not underperforming in terms of growth. If they are, and the future opportunities look slim, consider selling it down.
- Are any of your properties starting to cost too much in maintenance – if so, consider whether holding with the costs associated will negatively impact on your portfolio’s overall performance.
- Consider what type of property needs to be added to the portfolio to assist the overall outcome.
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