Financial freedom is the number one goal mentioned by most investors – but beware, your investments may make you a prisoner. Are you treating your property investment as a business?
A business should be able to run without you
If your investments can’t work without you – congratulations, you have a job – and not a great paying one at that.
You should be able to work rest and play without fretting over your investments. It should add to your life not detract from it. A concept called Other People’s Time (or OPT) was first relayed to me by Robert Kiyosaki. When you realise time is worth more than money, you are truly wealthy. A concept lost on the DIYers, who never charge for their time.
A business should be scalable
If the business cannot grow or has a certain glass ceiling, it is not a business I am interested in. In the era of serviceability, you need all arms of the business to pay its way. A business that constantly loses money will not be scalable or sustainable in the medium to long term. To be able to scale you need other people’s money (or OPM) – as much of it to make the business sustainable. Tenants’ money, tax benefits and any other income that means you are reducing your risk.
A business should be saleable
Begin with the end in mind – what’s your exit plan? Why did you get into investing in the first place? It is no use putting your hard-earned money into an asset class or property that will be difficult to exit when it comes time.
This is best decided at the point pf purchase. Why do people live here? What is the competition to buy like? How many days on market? What is the amount of vendor discounting? Even the approach of lenders to this property, building or suburb should be considered. Any of these factors could lead to red flags and, most likely, an investment decision you regret.