Landlord Series 04 – Managing The Finances
Hi, Brian and David here from Bugwash Property. Got a question for you David, for the landlords. How should they best financially manage their investment portfolio?
Great question, Brian. One of the things that I like to do with our clients in the beginning is to sit down with them and we draw out all the investment properties that they have, and then do this exercise called money in versus money out. So money in on the left, which is rent, tax deductions, that’s basically about it. Some people might have some sort of solar program on their property where they get some rebates or money in through electricity, but for the most part it’s gonna be rent and tax deductions, versus this thing called money out, which is all the expenses that a property incurs, like your rates, insurance, property management fees, any loan repayments, and maintenance etc, and any body corporate fees. So when you do that exercise, money in versus money out, it quickly allows you to know is this property costing you money to hold per year? Is it making money? It allows you to find out where you’re at, if you need to inject on a regular basis money to your property investment account as well, so you can make sure that you’ve always got a float. Because in a way, your property investment portfolio is a business, it’s a passive business, but it’s a business, and businesses need to run floats, and you want your float to be growing, not becoming depleted. And the biggest mistake that I see landlords make is they tend to mix their personal economy with their business economy, and they mix it all together. And the rates come in, then all of a sudden they’re panicking. Where am I gonna get the money from for rates and all these bills? Because everything gets mixed in together. So you gotta keep your personal economy away from your business and run it professionally, and treat it like a proper business.