How applying “SMART” strategy help investors grow their property portfolio successfully.
SMART refers to:
- Strategic thinking
- Manage risks
- Against the grain investment
- Review regularly
The road to becoming a successful property investor is neither quick nor easy, but if you follow the pillars of SMART property investing, you have a much better chance of going the distance.
Here’s everything you need to know about the SMART acronym and how it works.
People who are successful in all kinds of fields, such as sports or business, propel themselves forwards by setting goals. They then create their strategy according to those goals.
When it comes to investing, you need to set short-term and long-term goals. Set a benchmark ( example) of how much net rental income you want to receive per week. Then, determine the level of net property assets that you would like to own.
Setting objectives to hit gives you something to aim towards, as well as a means to measure your progress. Instead of coming up with a plan of action blindly, think strategically about the processes that need to be put into place in order to achieve your goals.
SMART property investment requires a good financial strategy and a tailored property strategy. This in turn helps you to mitigate threats or fluctuations when they occur. And trust us, they do happen.
Investment in real estate has its ups and downs, so you need to be prepared at all times. Managing the financial risks that come with property investment is important, but you also need to put measures in place that will minimise your risks.
- Ensure you don’t over-leverage; build up sufficient buffers using your line of credit, offset account, or other means of saving.
- Build a cushion to cover negative gearing costs as well as the flat stages of the property cycle.
- Create an exit strategy in the event of poor performing investments.
- Put the necessary ownership structures in place to ensure asset protection and to legally reduce tax.
Remember, at the end of the day, it’s not about how much investment property you own. Even though you may want to build a big real estate portfolio, what matters most is the size of your asset base and how hard your money works for you.
Against the Grain Investment
Being a SMART investor means studying and learning to understand the real estate cycle and how it performs. You will then be able to make investment decisions based on market drivers rather than market influencers, which may be a dangerous oversight.
Remain aware of the fact that the property market operates in cycles. Therefore, there is power in counter cyclical investing. Rather than following the crowd, don’t diversify just because there’s a new “hype.” Rather, stick to your niche and realise your tangible wealth.
Get into the habit of regularly reviewing your investment property portfolio to analyse its performance.
Successful property investment is about more than just buying a good property. You need to be able to hold onto it too. The overall process is fluid and needs regular updating, so keeping in touch of what’s going onin in the market and across your financials is crucial.
To ensure you always have these insights on hand, we recommend performing a review at least once a year. Ask yourself questions like:
- Has the property performed as expected in terms of capital growth?
- Over the next decade, is it likely to outperform the averages?
- Is there anything that can or should be done to improve the property that will ensure a better return on investment?
- If there is a slump, is it worth riding out or should you sell and invest elsewhere?
When it comes to SMART property investment, you should be weary of becoming complacent. Always keep learning and listen to podcasts, read blogs or books, and attend seminars or webinars to improve your skills.
A SMART property investor should surround themselves with a team, and ensure they’re not the smartest person on it. That might sound counterintuitive, but it’s not. Basically, having a team of experts around you to help you manage the process and think strategically will go a long way toward success.
Although you’re working on continuously learning and doing research, you don’t have all the knowledge or all the answers in your own capacity. But there are many successful, proven property investors, brokers and surveyors who do.
Don’t try to be a hero and wear all the hats. Instead, create a team of independent professionals. We recommend keeping company of:
- A good accountant who understands property data and investment is the first most important person to have in your corner.
- A fellow property investor who can act as a mentor. They can provide advice because they’ve gone through it all before, and you can refer to them as a soundboard to bounce ideas off of.
- A mortgage broker to assist in creating a smooth-sailing process of buying investment properties. Brokers explain all the different mortgage options to clients, and help them find the best home loan package that’s personalised to achieve their goals. If you’re new to property investment, they can explain the difference between negative and positive gearing, fixed versus variable home loans, and how equity works when buying a second property.
When buying and maintaining investment property, applying the SMART technique will help you achieve success.
- Set goals and think strategically about the processes necessary to help you achieve them.
- Identify all risks and find ways to manage and minimise them.
- Don’t be distracted by other investor stories; stick to your plan and your niche rather than investing along with the masses.
- Review your portfolio at least once a year and assess whether everything is going according to plan or whether changes need to be implemented.
- Employ a team of professionals that can guide you through your investment journey.
The Mortgage Agency has highly qualified mortgage brokers who specialise in property investment. Whether you’re a first-time investor or have a well-rounded portfolio, our brokers can assist and add value during every step of the purchase process.
If you’d like to get in touch with one of our professionals, contact us today.
Please note that every effort has been made to ensure that the information provided in this guide is accurate. You should note, however, that the information is intended as a guide only, providing an overview of general information available to property buyers and investors. This guide is not intended to be an exhaustive source of information and should not be seen to constitute legal, tax or investment advice. You should, where necessary, seek your own advice for any legal, tax or investment issues raised in your affairs.