This is the right time to make a plan for your investment goals over the next decade!
The question of what you want your life to be like in 2030 might seem strange. Although, psychologically, it is the perfect time to make wealth creation plans that you would like to accomplish in the next decade.
If you are a relatively new investor or an experienced one, your goal setting will differ greatly. We will explore each of these scenarios to determine the best strategies for each investor type.
If you already have a portfolio, this is the time to think about how you will consolidate your debt over the next decade.
Investors can sometimes be so occupied with accumulating properties that they neglect the fact that they will eventually repay their loans at some point.
If you are in your 40s or older, you should start now.
As a first step, you should review all of your loans and refinance if needed to the most appropriate loan products to meet your financial goals under the current low-interest-rate environment.
Our opinion is that anyone, young or old, who doesn’t make the most of these historically low-interest rates by repaying principal interest on some of their loans is a little silly.
However, this shift requires a mindset of a long-term investor meaning; that you should pay off your home loan before investing in properties. This attitude was always based on the fact that owner-occupier loans aren’t tax-deductible, which is well and truly a thing of the past!!
By reducing your investment loan debt, you create more cash flow, which you can use for lifestyle reasons such as switching to part-time employment sooner than you imagined. At some point, you can also use those funds to pay down your home loan.
Consider reviewing all of their expenses, such as insurance premiums, in order to reduce your outgoings.
If you have extra cash flow, it can also be diverted to paying down your portfolio faster.
The days of purchasing multiple properties every year are gone! It’s unlikely that lending will change much over the decade as it is still relatively conservative compared to times in the past.
Instead, new investors should set achievable goals by purchasing three or four investment properties over the next decade.
During the next year or two, new investors should consider buying houses in the middle of our capital cities, particularly Sydney and Brisbane. Both have steady markets and historically have better cash flow.
Eventually, you may also consider taking on a small development project or acquiring a commercial property to increase your cash flow even more.
Usually, the first five years are the best time to accumulate such a large portfolio.
The last half of the decade is set aside for debt consolidation as well as strategies, such as renovations or small developments, to generate additional capital growth and cash flow.
It used to be common for people to boast about how many properties they owned, without admitting that some of the properties were probable purchases without much thought.
As a real estate investor today, it is more important, and ultimately more lucrative, to grow a portfolio of fewer properties, but those that are strategically selected for their capital growth and cash flow prospects, according to your goals and financial profile.
During this decade, you must be realistic about your wealth-creation goals, while acknowledging that you will eventually have to repay the debt you incur.
It’s vital to take advantage of the current leading environment and choose principal and interest repayments if the difference between interest-only and principal and interest isn’t large.
Depositing extra funds into an offset account can further reduce interest on your loans, while also allowing you to invest the funds elsewhere when the time is right.
In fact, we believe there will be a number of investment opportunities in the next two or three years,
That’s because people may struggle to manage their mortgages when their repayments switch from interest-only to principal and interest.
Savvy investors, new and established, will be in a position to cherry-pick the very best properties, because they started this decade setting goals for the next one.