A successful property portfolio is
one that is not reliant on you, as the investor, to dictate its performance, a
property guru has said.
The ultimate goal for a property investor is to have a
property that is neutrally or positively geared, and in demand from tenants, so
that it is able to ward off negative scenarios seen throughout2020, Pure
Property Investment’s Paul Glossop said on a recent episode of The Smart
Property Investment Show.
"What stops a market from growing? Typically, it’s
going to be things like more expensive money, additional supply. And if those
two things alone happen to a property and you don’t have a good answer to say
what happens when these things happen...
"Firstly, you’ll have a lot of fixed costs such as
high strata, high running costs. If your interest rates go up because the
market has actually stalled, that’s what’s causing it, as well as additional
supply, because that is what typically happens on the backend of a boom, then
that’s really when people are left hugely with those issues,” Mr. Glossop
explained.
For Mr. Glossop, the definition of a successful
property investor is one with a portfolio that effectively, over time, is not
reliant on the investor to dictate its performance.
And when it comes to building that resilience to stand
the test of time – i.e. a moat around one’s property portfolio, Mr. Glossop
shared an interesting analogy.
"It’s essentially like raising children,” said Mr
Glossop.
"They require a lot more attention, a lot more need,
early in the piece. Firstly, they need more money, you need to save more. They
take a lot of time, they’re harder work until you actually raise them to a
point where your intention is that they become self-sufficient.
"Good property portfolios are effectively geared that
way, where you know that you put effort and time into it initially, and it
probably won’t take 18, 25, 30 years to get to maturity. It would probably be
more like, in a good fast case, two to 3three years, and in some cases
maybe seven to eight years.
"But you’re trying to build it up to eventually say,
‘Take me away and you got to do what you go to do, which was my intention from
day one’,” said Mr Glossop.
Speaking about building a moat around a property
portfolio, Mr. Glossop noted the property investors when putting pen to paper
needs to consider two factors – where to get the fastest growth in the shortest
period of time, and their defence when that growth inevitably stops.
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Jason Gwerder
Wednesday, 6 January 2021
