The right advice can turn your investment from a dud - into a winner, says Aaron Tunstall
You probably have a lot on your plate: work, family, fitness, friends and finance. You probably bought an apartment and hired a property manager because you wanted a ‘hands off’ investment. So sitting down with a financial adviser and re-evaluating your investment structure is probably so far down your to-do list that’s it’s just a speck in the distance.
That strategy can be surprisingly successful, if you’ve set your investment on course and it’s ticking along happily.
But if your investment has become less ‘the goose that lays the golden eggs’ and more ‘the albatross around my neck’, you need to take action. This does happen to some of our investors, for a range of reasons, for instance:
- A change in financial circumstances which means they need more income.
- Retirement is approaching and they want to get rid of a negative cashflow property.
- They were expecting rents to rise more rapidly than they have done.
- Interest rate increases are going to make their property less profitable.
- They bought at the height of the pre-GFC market and are waiting for the value to exceed what they paid for it, which is taking longer than expected.
Recently, a couple whose apartment we manage decided they wanted to sell their apartmentbecause they were retiring and wanted to improve their cash flow. They were finding it very stressful any time a tenancy ended, because they would panic that if It was left vacant for a long time they would be covering the loan without the help of the rent (it hasn’t happened yet, but that didn’t stop them worrying about it). With prices having improved and real estate agents knocking on their door, they wondered if it was time to cash up.
They approached our sales manager, who talked to the property manager about the apartment. The property manager explained that the apartment was an excellent investment, and would be easy to sell, but that if it was her apartment, she would hang onto it. Our sales manager returned to the couple to ask if he could set up a meeting with our registered financial adviser (a free service we offer to all our owners) to talk about their property.
The adviser was able to make some startling changes to their loan structure. He switched the loan from principal and interest to interest-only, and locked in a mortgage rate which is 1% lower overall than what they were previously paying. This has freed up a substantial amount of cash for the couple, who were rather surprised at how much more money they had on hand. They were also delighted with the sales appraisal for the apartment, which put into perspective how well the investment had performed and how much equity they had in their portfolio.
The result was a complete reversal: They decided to keep their current apartment, and are now looking to buy another apartment. They’ve re-evaluated their investment strategy, set new goals and established a plan for the future of their property portfolio. Don’t sit and worry about your investments if they aren’t performing as you’d like. Book a session with a financial planner and see how changes can be made to free up cash – or make your money work harder. Or talk to a mortgage adviser about creating a plan for your loans which will best suit your income and investment style. With any luck, you can put your investments back at the very bottom of your to-do list and concentrate on all the other, more exciting aspects of your life.