022 – Portfolio Management & Remortgages – Just because you have equity doesn’t mean you should take it

So you've got some spare equity sitting around, and it's time to add to the portfolio. Rather than sell, you've taken the smart route and decided to keep the property and remortgage some equity out.

So just finally with this remortgaging, remortgaging is something that is, once you get equity, you can sit there and go great every time I've got some equity, I'm gonna take it out, and I'm gonna continue to grow and grow and grow and grow part of portfolio management principles, 

First principles with portfolio management is this that if you continue taking money out, taking money out, whenever you've got it, then what happens if the market starts to tank, you may find that because you've been taking all that out, your income hasn't kept up with all your cash flow hasn't kept up with the mortgage amount.

All of a sudden, things start to drop rents come off, you're left holding this mortgage, but you can only afford this one. Yeah. So oftentimes, what we try and do is as we build the portfolio bigger, if we don't have the discretionary income on the side, what we try and do is lower the loan to value.  

So just because you've got equity there available actually doesn't mean you need to take available equity. What I say is somewhere between 60 and 80%, is portfolio building. Now, when you're first starting out, you may go to 90, that's fine. But then you want to bring that down 80, as soon as you possibly can. And then somewhere between 60 and 80, depending on your other discretionary income, depending on how many properties you've got, depending on where they're, you know, if they're all in the same street, that may not be as good because that street will go down at the same all the same time. But if you've got a bit of diversification, you know, so you can do different things.

This is all the portfolio management principles that we talked about. So just because you have equity doesn't mean you should take it. All right. But by the same token, if you've got a lot of equity lying around, you might want to take some equity out to continue to grow your portfolio because depending on what your goals are, and again, this is all about, you know, looking at your age goals, you know, all those sort of things, add all those up. And that's really just the process of sitting down with your portfolio manager and going right, should I buy another one? Should I be remortgaging? Should I be leaving it there? Should I be dropping my loan debate? Where's the market at what should be my strategy now leading into the market that's coming up? Alright. So that sort of gives you some idea about real mortgages. It's, it's awesome when it happens, feels good, because it feels like you're making money.  

One final point. Should you sell or should you re mortgage for me and I've had this happen where I've always been on hold, and I'll hold and Never Never Sell okay with the Asterix.

But one of my mates were on keel. Yeah, both started off like this. He was did very well, he would buy a property, and he would renovate their property and he'd sell the property and you know, what, every probably three or four months he'd have 50 grand, boom, yeah. Me. No, I was just buying property by property, buying property, great, great holding and holding and holding and remortgaging remortgaging buy another one did that. So actually, by the time I had 10 properties, okay, 10 properties, but I had 10 properties he had, well, one that actually, let's say two, he had his own property, and he had his the one that he was actually doing at the time. So let's see had to the rest of him was every three or four months, he'd be out because what happened he made $50,000. $25,000 he would be put into the next deal. So he'd made that money, put that money back into the next year, which is great. And then the other 25 Yeah, here we go out. And we'd go out drinking and he'd be have 50 rat $50 notes. And he'd be able to flash them around and have the cash and everyone thought and looked at him. He had the porshe, he had the all that stuff and looked at him. And it was interesting, because it was myself. And the two brothers, so two brothers. So one brother sold soul boats, all boats, Sol Sol Sol did very well, last night, I was like not knocking him. You know, we had some great nights. The other brother did the same as me. 

It was interesting, because we hadn't caught up for about 10 years. And we caught up. And it was amazing to see 10 years on of that process, because he still only had I think he had a couple more properties at that stage. You know, but this stage, we had a substantial amount of properties. 

The interesting thing was when we looked at the value of our portfolio versus his wealth, you know, he'd been from being anyone outward external, you know, social media would have said, You know what, he's wealthy. He's a millionaire, you guys, we don't know. Yeah.

The reality was when you looked at the wealth versus his wealth, what he'd done every time he got in and got out, got and got out, he was paying tax. So he was sending money to the government every single time he went in, it was probably 5% in and 5% out 5% in and 5% out and then because he had ready cash, he was blowing it on Ferraris and landed not maybe not frozen, let me use but you know, on lifestyle, but he was still doing so might never say he'd done well. But there was so much easier doing this. I mean, we weren't renovating properties we weren't buying and selling we just bought and held.

So consider that when it comes to remortgage and that sort of thing.

Live with passion,
Brett