What to do if you bought a bad property?
Whether it has gone down in value or is costing you each month, a bad property can really drag you through the dumps.
So, what should you do if you have a property that is holding you back?
Nathan shares his tips below.
We are on the dawn of a new property cycle.
In a recent blog post, Nathan Birch made a pretty big call regarding the property market and the global economy at large.
He said we are now in a global financial depression (GFD) – and at the bottom of the property market.
This means that a new cycle of growth is soon likely to occur.
In other words, it is now time to accumulate assets when others are fearful and desperate to sell. It is also time to set yourself up to reap the benefits of rising prices before they happen.
Do you want to play catch up or cash it up?
While the next market of growth could be an opportunity for investors to retire, it could also be one where those with the wrong properties are simply playing catch up.
“In this market it’s important to understand what you are holding,” Nathan says.
“Is it going to get you to your end goal in the next market?”
Getting the most out of your position.
As always with property investing, being strategic is key. Each property has a different purpose within a portfolio, and sometimes, certain properties don’t do justice to your position.
“People need to be cautious of the holdings that they’ve got because you could be holding a property that may make you $200,000 in the next five years. But if you didn’t have that property, you could possibly buy five other properties that could make you $1 million in the next five years.”
Don’t follow the herd.
Nathan often sees people who are selling properties when they should be doubling down on their portfolio – or buying properties when the market is at the top. This is when people get slaughtered, he says, and it happens time and time again through different eras and different markets.
He says, a lot of people get scared and act irrationally with their assets. Instead of following emotions and what the greater population is doing, investors should make informed decisions based on logic and numbers.
“I wish property prices halved right now, I really do.” He says.
“I wish they went down by 90%, because then I’d go out and find a way to get money to buy more of them.”
Review, review, review.
If you have a bad property, Nathan recommends assessing your position.
“It’s important to constantly look at your position and portfolio and review where you’re at – and review what you can do in order to push on forward,” he says.
“If something is underperforming or holding you back, you need to make a calculated decision as to whether that’s the best thing to hold or not.”
Weigh up your options.
Before deciding whether to keep or hold a property, Nathan recommends looking at the opportunity costs involved. If holding it is going to prevent you from buying better performing properties, then selling may be a better option.
But, if you think the property is worth keeping throughout the next growth cycle, you may want to consider ways you can add value to it.
Renovating or redeveloping are options that may help you better your cashflow and/or add capital value. Before embarking on any project, it is important to understand how much it will cost as well as the return you will likely make. Is it worth the expense? Or is it better to get rid of it and buy better properties.
Refinancing may help you reduce your weekly costs – but it also may stop you from moving forward. Make sure you understand any implications that may occur if you switch loan products to save money.
Another thing to consider is your serviceability. If you sold your existing assets in order to buy others, would you be able to get enough finance in order to pull the trigger? It’s not always a case of sell and buy something to replace it.
If your cashflow is suffering because of a bad property, it can be helpful to do a rental review. Is your property manager too lazy to get you the optimal amount? If your property has good upside for growth but is lacking in cashflow, make sure you are charging the right amount of rent before giving up on it.
Get the max.
If you do decide to sell a bad property, it is essential to go with a selling agent who will get you the max. Nathan has an extensive network of real estate agents who really know how to get buyers involved. Instead of settling for less, a good agent will create enough momentum and urgency in order to get the highest sales price possible. [https://getthemax.com.au]
Call on your success team to help.
If you are totally undecided on what to do, speaking with your team of professionals can help. A property investment expert can help you decide if what your holding is worth keeping while a financial planner, accountant and finance strategist can help you assess your options.
In any case, you are not alone. Nathan has made the call to offload properties that weren’t really cutting it anymore. He likens it to a journey in which you need to leave behind one vehicle in order to take the next. If you are flying to Perth, he says, you need to get to the airport. But, before you can catch your plane, you need to ditch the taxi, Uber or car you travelled in to get there.
Different properties can take you from A to B, but in order to get all the way to Z, you need to constantly assess, review and take action until you arrive at your destination.