Investing – Where is our money?
As the landscape of investment properties changes I though I would share what the next moves for our personal property portfolio is.
For many years now we have taken a more conservative approach to our portfolio, concentrating on yield as opposed to capital growth. Maybe 5 years ahead of itself, this strategy has resulted in us missing out on the high growth experienced throughout Sydney and Melbourne.
It is very clear that housing affordability is now very much on the agenda with the government announcing stricter foreign investment controls, reduction in claimable expenses for Investors and a commitment to land supply driving costs down. What’s this mean for us?
Well, I think that property will return to some stable growth, similar to what Brisbane and Adelaide have experienced over the past 5 years. Will we see incredible growth again? Well maybe, history certainly suggests we will, but I think the cycle will remain in this holding pattern for a while now.
At the moment I am looking at the property market no different to how I do shares, creating choice between income (yield) and speculation (growth).
So, whats this look like and where is my money?
We are still with yield, we continue to hold properties which deliver exceptional returns. The theory is based around positive cashflow before depreciation and negative gearing after. What this results in is a profitable asset with increased tax effectiveness.
We have recently decided to add solar to each investment. Through a solar distributor we have managed to reduce our footprint whilst complimenting our strategy; we supply the solar energy and invoice the tenant with our margin; whilst the solar panels increase our depreciation slightly.
So, whats capital improvement look like?
Speculation; for a risk taker, this is the path I would like to be on, but right now it doesn’t suit our life choices. I think that opportunities scatter throughout Australia to capture cyclical properties on their way up. Freshly out of a mining and resource boom I think Central QLD, around Mackay and Townsville presents great capital gain potential.
Moving into a land boom as we begin to create the hobby farm era and clean energy plants I think we can find some great exit strategies out of the city rush.
It excites me to consider the opportunities, but with cyclical demands come risk, so the exit is as important as the purchase.
So, our property portfolio stays put for now, concentrating on improving the rental income and reducing cash expenses.
What are your thoughts?
If you wanted to explore any of this in greater detail we welcome you to get into contact.
- Date - August 3, 2017