Strategies That Protect Your Portfolio During Tough Times

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As I’ve been recording these videos and I’ve just had Carl the crab on my head. If you didn’t see it go look for one with the red Carl the crab. I’ve talked about something where when you’re holding properties through market conditions, one of the fears people have is they say to me, “Dr Ro I want to get into property but what about the market conditions?”

One of the beautiful things about buying properties with cash flow is if you’re only in a capital growth area so, for example, when I end up in Melbourne where I know I’m going to be shortly, or whether it’s Singapore, or whether it’s Hong Kong or even into places like central Europe. It doesn’t really matter if you’re in a market where it’s primarily capital growth focused and you don’t have the banks wanting to lend to you. It does make it more difficult.

We are very blessed in this country in the United Kingdom because we have a small country of 65 million people and packed into a small island with a growth rate of about 400,000, roughly per year. So you can imagine the demand that puts on the property market. This is why when I’m overseas internationally and I’m talking to people when I’m presenting, they get so excited about the UK. It’s like, you’ve got a tiny island there not enough properties, no wonder there is so much demand. 

No wonder the government are excited about us as investors buying these properties up to help support for example, anything from social housing, asylum seekers, students, professionals, first-time buyers, maybe buying a property giving them a chance to rent for a period and then allowing them to buy from us.

There are so many amazing strategies. So from my perspective when I’m looking at a country which is primarily capital growth based very little cash flow, the problem you’ve got there is you’re hoping for this. You’re buying this value and you’re hoping it’s going to go to that value. And during that time you’re not getting cash flow, so it could take 15 to 20 years before you sell it.

If you get a recession and it becomes flat for a while, you’ve got no cash flow but you’ve got no capital growth either. Whereas if you buy a property during that period, in other words a recession hit somewhere in here and you’ve got cash flow coming in, for example, a small buy to let in the United Kingdom for about 60 or £70,000 will produce £200, £250 maybe £300 a month. If you go for a larger a multi-let house of multiple occupation you could be looking at £800, £1,000, £1500 per month net cash flow. 

So those properties, for example, may not be going up in a great deal of value, but you’re producing a cash flow. If you’ve got 10 of them and they’re producing £1000 each that’s £10,000 a month. I’m just trying to convert that into Singapore dollars that’s like $20,000 a month or if in you’re in Australia something similar I’m guessing if you do the numbers.

So what if the property stays flat for the next five years?

So what?

I’m making like a hundred grand a year, over five years that’s £500,000 half a million. And that is the bigger cash flow strategy is that you are taking effectively your profit in this case cash flow, instead of hoping for the capital growth. So you may only get a 50% growth in the value of the property versus the southern base property or a Sydney-based, Melbourne-based, Auckland based, wherever it is you are depending on your market conditions. You’d have to do the evaluation yourself on this. 

For example let’s look at a southern property it might double in eight years, whereas it might take the northern property 12 years to double, but the northern properties produce for me so much cash flow. So what I’m saying here is are you looking for the lifestyle first rather than the hope of the lifestyle of the equity in the future?

This is where if you protect your business in the right way and this is the great thing about property, is by producing the cash flow even in a recession people need a roof over their head. Even these people, the negative people, who say you shouldn’t get into property, they still need a roof over their head. If you’re an entrepreneur you need a roof over your head. If you trade the stock market you need a roof over your head. If you run a business, if you’re in a job you need a roof over your head. If you’re a doctor you need a roof over your head. If you’re Dr Ro coming to a seminar you need a roof over your head. 

As landlords we can provide roofs over people’s heads, in other words what we can do is we can buy the property to allow them to live in our properties. And whether the market is going up or down doesn’t matter because we are producing a cash flow.

You get enough properties and that cash flow is amazing it feeds the kids. I’m about to go and get some food to eat in just a moment and when I go to the restaurant to eat I can’t pay the owner of the restaurant from the equity in my house, because he is going to go, “Hahaha give me some cash.” But I can pay it from the cash flow from my properties.

On that note, I shall sign out because I have to get back to my computer, back to my slides to get ready for my presentation tomorrow. I hope to see you very soon, and if you do see me at a training at some point in the near future, come up to me and say, “Dr Ro it’s great to see you and I love your glasses.”

Signing out. 

Disclaimer: This video or written publication does not offer investment or financial advice and nothing in them should be construed as investment or financial advice. Our publications provide information and education only. The information contained in our publications is not, and should not be seen as a recommendation to use any particular investment strategy. Always seek financial advice from an independent financial adviser around your own personal financial situation.

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