7 ways to protect your assets and capitalise on the current economic conditions.
If you want to make the most of the current market, here are seven things you can do to in order to protect your assets and prosper along the way.
1) Educate yourself and know the rules of the game.
“To protect yourself during this market, you must first understand what this market is,” says Nathan Birch, renowned property investor and head of Binvested.
He says, it is important to understand every aspect of the game board, both its parameters and what is driving it.
This will help guide you to safety as well as help you plan out your strategy for success.
It’s a bit like having the Sports Almanac from Back to the Future 2, he says. If you understand the drivers of the system, it is like you are a time traveller because you can see what is most likely to happen.
Any successful business will make use of analytics in order to identify the entity’s strengths, weaknesses and opportunities.
Property investing is the same. If you look at what has caused the market to go bad and what will make it good again in the future, it is possible to identify the warning signs and the opportunity signs. If you get this right, you could potentially accumulate millions of dollars’ worth of assets and profit within a short time frame.
2) Have a plan.
Once you know how the financial system operates, it is possible to map out a good plan.
While most people spend time planning their weekend or their next holiday, Nathan recommends planning for a financially free future.
“You need to have a solid plan of attack in place in order to minimise risk and maximise opportunities,” says Nathan.
Speaking with a good financial advisor and accountant who understand the current market will help you tailor a plan, while talking with Binvested will help you look at your property strategy to find ways of improving your position.
“It’s not always about buying, it is also about managing your position,” says Nathan.
He says to make sure your team of professionals pass the GFC test. Ask them what they did during the GFC – how did they get through it? What did they do to protect themselves beforehand? And, how much profit/gains did they make during this time?
3) Have a budget.
Not only do successful businesses have budgets in place, they also make use of forecasting to help them optimise their operations.
Having a budget enables you to optimise your cashflow, says Nathan.
It helps you to identify ways to tweak your position in order to create a better financial outcome.
For instance, by looking at your budget, you might find there are expenses you can cut out or reduce, as well as ways to increase your current income.
4) Make sure your cashflow is strong.
If you have a poor cashflow, you are putting yourself at greater risk of going broke. After all, you can’t make mortgage repayments on your assets if you lose your job.
Those who have a self-sufficient property portfolio are at less risk of losing their properties if they find themselves out of work.
If you are entering into a time of economic volatility, it is important to optimise your cashflow so that you are better protected.
It may be time to rid yourself of assets that are burdening your cashflow, and to look at ways you can increase your rents.
Nathan recently spent $2,000 on upgrading some of his properties. Not only did this increase the value of the assets, the extra $40 per week he earned in rent gave him a 100% return on his investment.
5) Cut off dead weight.
This is a time where you don’t want to have bricks tied to your feet if your boat capsizes, says Nathan.
“It is a time to go lean.”
You may have a car loan or other bad debts that are dragging you down.
“If you look at your budget and you’ve got all these loans that are costing you – are those things that you can chop to get you through the storm?”
It may be better to let go of these things now and then reconsider them during a more stable market when you are in a better financial position.
6) Protect your Super.
“This is a market where Super Funds are going to be at massive risk,” says Nathan.
During the GFC, he saw people lose about 50% of their Super during stock market crashes.
He says it is important to speak with a financial advisor about how to protect your Super and your financial position.
“You don’t want to mess around with your whole life savings,” he says.
“A good financial advisor can protect you and ensure that you don’t get hurt.”
7) Take advantage of cheap assets.
While poor people focus on salaries and savings, wealthy people focus on accumulating assets, creating cashflow and improving their net worth position, says Nathan.
By streamlining your finances, you will be in a better position to take advantage of good opportunities when they arise.
While many people are too fearful to buy in a declining market, Nathan believes now is the best time to purchase assets.
“This is a great market that we have now,” he says.
Properties are selling for much cheaper than they were 24 months ago – which means there are plenty of bargains to be had. Coupled with the fact that there are less buyers in the market, this is the perfect time to take advantage of cheap assets.
He says, most people would jump at the chance to buy a new car for 20% less – yet they are reluctant to buy a property when the market has dropped by this much.
If you know the way the money system works, you will have a good idea of when to buy and when to watch your assets grow in value.