The habits of investors who have grown massive portfolios

1. Understand the fundamentals

Successful investors, first and foremost, familiarise themselves with the most basic fundamentals of investing in properties.

“[It] comes down to your ability to hold the property, which comes down to cash flow,” Ross said.

Asset selection should be an important part of the process for property investors looking to succeed in the business of wealth-creation.

The mortgage broker said: “You can have one property that takes all your negative cash flow or you can have 10 properties that takes that same amount of negative cash flow—it is one of the fundamentals.”

“That's a leveraging get off smart cash flow management,” Smart Property Investment’s Phil Tarrant added.

2. Balance cash flow and yield

Some of the factors involved in maintaining the portfolio’s cash flow of successful investors are rents and rental yields. According to Ross, striking a good balance between the two is one of the most important secrets to success in the business of creating wealth through real estate assets.

He explained: “They understand how much negative cash flow they can afford [on] a month-to-month basis, and they balance that.”

3. They use a ‘strategic point of view’

Since getting finance has become harder, smart investors always make it a point to ‘strategise’ in order to maintain good serviceability and borrowing capacity.

Ross said: “They'll take on strategies like ‘Where in my portfolio can I add a granny flat that's going to increase my cash flow and increase my serviceability?’ They'll look at it from a strategic point of view.”

“[Think] differently around that [so you can look] after your cash flow,” he added.

Being an active investor, as in managing and reviewing your rents on a regular basis, is one of the strategies that can help you look after your cash flow.

Another thing that contributes largely to cash flow is the interest rate, which you need to review regularly as well now that there’s been a lot of changes in the market, including an increased rate on investment and interest-only. However, some of the lenders are seen to be dropping their fixed rate amidst the changing Australia property market.

According to the mortgage broker: “You might be paying 5 per cent on your interest-only investment loan, but with that same lender, you can get a fixed rate at 4.2 per cent.”

“What's the difference of a 0.8 per cent over $1 million on your portfolio? It's $8,000 a year in cash flow.

“[Successful investors are] looking at things like that to really manage their cash flow … We say … ‘Cash flow is king’. It's about having those buffers,” he explained further.

4. They look at the bigger picture

Contrary to what a lot of people may think, successful investors don’t just stick to one particular strategy because there’s no such thing as a “foolproof strategy” in a venture as unpredictable as property investment. Focusing on just one strategy can limit the opportunities you get on the field, Ross said.

Instead, one should strive to be open about the often-changing situation in the market—analyse it based on their goals, capabilities, and limitations as an investor and take a long-term view when making financial decisions.

According to him: “Looking at the bigger picture [is important] as well. Sometimes, people are focused on ‘I only want to deal with a big four bank’, which limits their ability to grow a portfolio.”

“The asset selection around cash flow and having all these other factors in to really managing your cash flow to hold property long-term is really important,” Ross added.

5. They have a good team of professionals around them

Lastly, but certainly not the least, successful property investors will attest to the incredible value added by a dependable financial team to their portfolio.

A team of buyer’s agents, accountants, and other property professionals can help you assess your goals and determine the next best step to take in order to achieve them.

“We sort of look at where you're going and what you're doing, [and] I think that's key ... The mistakes that the not-so-good investors make is … [simply buying] the wrong property,” Ross concluded. 

Tune in to Ross Le Quesnes’ episode on The Smart Property Investment Show to know more about the habits he sees among the best investors in today’s market as well as how growth in the investment industry has been enhanced by the mortgage industry in the last few years.

Tags:

• Expert advice

Share