B Invested

10 THINGS TO EXPECT ONCE YOU BUILD A PORTFOLIO OF 3 OR MORE PROPERTIES

If you’ve gone from one investment to three – congratulations! You now have triple the assets and have brought yourself closer to your vision of success. As your portfolio grows, however, so your day-to-day life changes – sometimes in unexpected ways. The following are ten things to expect once you build a portfolio of three or more properties.

1) YOU WILL BE INUNDATED WITH PAPERWORK

One property = more paper work. Three properties = triple the paper work. 160 properties = let’s not even go there. So, what should you do with the seemingly endless rental statements, council bills, strata notices, water rates, insurance statements, maintenance/repair bills and loan documents that fill your mail box each day? Don’t risk getting buried in all the paper. It is important to stay on top of data entry and filing, otherwise, when tax-time hits, so will the stress.

My Property Tracker is a web-based bookkeeping service that allows you to send through all documents (not just bills) relating to your portfolio. A team of Australian property investors enter your data and securely archive your documents, allowing you to see an up-to-date picture of your portfolio’s performance all year round. The online interface means you can access your account at any time, from anywhere in the world to see how much money your portfolio is making. When it comes to preparing for tax time, all you have to do is click a button, and the software will generate a report of each property to give to your accountant. With MPT, you no longer need to pay hourly for a bookkeeper, or worse, for your accountant to do the preparation work. You also needn’t spend hours of your own time sorting and entering data – and this is the real saver – because your time is not tax deductable, whereas, the cost of using a professional service is.

2) SAVING BECOMES MORE DIFFICULT

Along with all of the bills you receive, comes all of the money you have to spend paying them. Although a lot of costs will get taken from rental earnings, you will still find yourself dipping into your own savings to cover some repairs and maintenance, as well as insurance and some strata bills. The cost of buying and holding properties makes it much harder to save. Despite this, however, you are still making money in the form of equity – and (depending on growth) you will probably make much more in equity than you would have saved otherwise.

3) YOU HAVE DEBT – AND A LOT OF IT

Daniel Young, investment expert and co-founder of Binvested, says, most people believe debt is bad, but it is important to remember that your investment debt is generating an income. On top of this, a lot of people also get buyers remorse after making a purchase. Daniel says, it is important to trust in your research and know that you have made an educated move towards achieving financial freedom. If you have done enough research and can justify each purchase as being in-line with your goals and situation, any buyer remorse will be fleeting.

4) YOU GET EMOTIONALLY ATTACHED

When buying an investment, it is easy to picture yourself living in it. Many people over-capitalise when renovating purely because they want it to look nice for themselves. If you want to make the most out of an investment, it is important to keep it in a good, tidy condition without spending a fortune. As Nathan Birch says, investing is a business. Don’t picture yourself living in your investments, and make sure any renovations are cost effective and necessary.

5) YOU BECOME A MANAGER

Not only is investing a business venture, you are also a manager. To be successful in business, you need a clear understanding of the numbers and how they stack up. It is important to immerse yourself in the running of your portfolio. My Property Tracker lets you see results without having to get weighed down in data entry, filing systems and complicated software. Simply off load the paper work to the MPT team, and you are left with a clear, accurate picture of how many properties you have, how much they are worth, how much they are making – as well as your net worth. This makes it easy for you to know when to review rents and get properties reappraised – putting you in the driver’s seat to optimise your portfolio.

6) YOU GET HIT WITH UNEXPECTED COSTS

Not only do your savings get hit with the week-in, week-out costs of maintaining three properties, they also suffer from unexpected costs, such as major repairs and vacancies. To cover yourself in the event of any unexpected costs, Daniel recommends having a buffer of around $6,000 (or six months’ rent) per property.

7) YOU HAVE TO CHECK-UP ON YOUR PROPERTY MANAGERS

Daniel says, the role of a property investor is to manage their property manager. It is your responsibility to contact them at least quarterly and check-up on any issues to do with your properties. How are they dealing with arrears? What are they doing to keep tenants in your properties? Are they charging market rent? Make sure they are working in your best interests as an owner while also addressing any issues raised by tenants.

8) GETTING FINANCE BECOMES MORE COMPLICATED

MPT developer and property investor, Laurence Ioannou, says, “If you want to apply for a loan and you’ve got one property – easy. If you’ve got five properties – hard.” He continues to explain that lenders, “want rental statements for everything, they want all your other loan documents” and this creates a requirement to collate everything. Doing this manually is no quick task. “It used to take me forever,” Laurence says. Now that MPT is on the case, however, time is no longer a factor. MPT allows users to quickly and easily generate a ‘broker report’ that provides an in-depth summary of all the data lenders ask for when assessing loan applications. Just like tax-time preparation, applying for finance has now been streamlined to the click of a button.

9) IT IS MORE LIKELY YOU’LL HAVE A PROBLEM TENANT

The more properties you have, the higher the chance is that you’ll come across a problem tenant. This is just a matter of odds – pure and simple. But, at the same time, having more properties makes it easier to weather the storm, because your other investments will help carry you through any unsettled periods. If you only had one investment and you were stuck with a problem tenant – then what? But, if you had five investments and got stuck with a problem tenant, at least the other four would be there to hold you up.

10) YOU MAY CATCH THE “PROPERTY BUG”

Daniel says, similar to the “travel bug”, once you start investing, you may catch the “property bug”, where you “sleep, eat and dream property.” He says, “You get addicted to it. The more you do it, the more you feel like you need to buy your next deal.” He continues to explain, “you just realise that owning property really is one of the best ways to financial freedom,” because of the amount of money it allows you to make within a reasonable amount of time. He says, it took him a long time to save for his first deposit before purchasing four properties in his first month. “Then,” he says, “I made $330,000 equity that I released – tax free.” No wonder the property bug is so catching!

Have you come across any unexpected surprises once you reached the 3+ property mark? Leave your comments below.

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