Properties : Assets or Liabilities ?
You don’t make money just by owning properties. Management and business acumen also need to be applied. In business world, success is about REAL money. It is about the size of your profit margins and the amount of money you are actually making.
‘Potential’ is superb, ‘future anticipated profits’ are wonderful, ‘equity’ is fabulous – but try paying your bills with equity or potential. You’ll come to a cruel realisation because most people want to be paid in real money, not paper money.
Successful property investment is about ensuring assets remains assets, and that they generate positive cash flow for you. Properties will be liabilities when they need money to be maintained and when you cannot rent them out at the rental rate that keeps you afloat.
In other words, they provide you with negative cash flow.
Contrary to what some of the property gurus out there tell you, if you are bleeding cash, get out of it. No matter how rosy the future potential or the so-called upside of the property investment, if you have to fork out money for it, you are just playing the game of breaking even.
What kind of upside we are talking about? Choosing the right properties will ensure assets do not become liabilities. Of course, careful asset management will also mitigate the risk of it.
Owning lots of property for the sake of owning lots of property is just vanity. Smart property asset management is the key to success, and you don’t need to own loads of properties to be financially free. The key is what you do with what you’ve got – even just a few well-selected properties that are carefully managed can produce an income way beyond many people’s day job.
I just had lunch with one seasoned investor who only owns seven commercial properties but the rental he is collecting every month is close to RM400,000 a month. That figure might be a bit too much for us ordinary investors to relate to, but I just want to bring you all back to the point: number of properties you own really does not matter.
It is what it brings you that matters. You could own ten medium-cost apartments which some give you positive cash flow and some give you negative cash flow, and at the end it equals out. With the time and effort you spent on managing it, is it worth your while?
Success comes from selecting the right assets and managing them effectively to ensure you can maximise your investment. Assets need to be sweated out, loan arrangements need to be planned, and any potentials need to be looked for in every inch of the deal.
Owning a lot of properties does not always equate making lots of money, but time spent actively and effectively managing portfolio will reap rewards. So focus your efforts on managing and making the most of what you’ve got, because that is the bottom line of business success, not how big your portfolio is.
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