My plan for 2011 is pretty basic. Only one goal. And, I want to focus on it. I don’t want to get sidetracked.
It calls for keeping things simple; no “hollywood razzle dazzle.”
So, here’s my plan; my goal …
Drive cash-flow upwards!
And, just how do I plan to do that? Simple. But, here’s the catch (isn’t there always a catch?) … it’s not necessarily easy.
The end result is to get rid of any assets that aren’t pulling their own weight. And, I’ve got a few.
One property in a “new build” that came in way over budget. I got bitten by a “rogue” deal. I take full responsibly for this mistake; but I learned a valuable lesson. Always check what the agent is telling you. No matter how friendly and trustworthy the agent comes across. And, no matter how reputable the real estate agency involved. You can read about this painful – but very educating – experience in my article “Swimming Naked in Alice Springs.”
Because I paid too much – about $85,000 over contract price – the property is not pulling its weight; it’s a negative cash flow investment. We’re short each year by about $5,000-$7,000; even though we have the property rented near or at the top of the market; $580 per week. And, this is for a relatively small 3 bedroom home. Yes, the rents are high here in Alice Springs! But, not high enough to cover my mistake. I don’t think we can expect to raise the rent much further. Certainly not enough to offset the shortfall.
So, the plan is to sell. When the lease comes up for renewal in August 2011, the house goes on the market. And, the market here in Alice Springs is fairly forgiving so we should make a couple of bucks on the sale. But, profit is not the main concern. The aim – the goal – is to improve our overall cash-flow. Selling this property will drive our cash-flow nicely upward.
NOTE: The plan is simple but not necessarily easy. You see there’s more to this “roque deal.” We’re still waiting on final certification. The house meets all standards and is built very well; thanks to my second builder. We have an interim certification so the house is perfectly legal to sell or rent. But, final certification requires some government paperwork which is slow in coming. You can read about this in my “Swimming Naked” series of articles.
Next, I’ve got a block of land under contract. We’re only waiting for titles to be released. Again, the plan is simple – sell the block. And, with the forgiving nature of the local market, we should make a handy profit. But, it doesn’t matter – much (Well, it does … I’m never excited about taking a loss!) Remember, my goal is cash-flow. Vacant land doesn’t generate cash-flow. Get it off the books.
The original intent of the vacant block was to build our own home. But, this plan got nixed when the “rogue” deal took the wind out of my financial sales. So, we just change course. No big deal.
We live in a very nice home right now. I don’t see any need to go build a new one for an extra $300,000 or so. When I think about spending an extra $300,000 for a new home I have to ask myself a question, “Will I be $300,000 happier in the new home?” The answer for me is an emphatic, “I don’t think so!” Though, my wife may feel otherwise! I haven’t asked her this question yet … Personally, I would rather have great cash flow and lifestyle than live in a big new expensive home and have to worry about scraping together the mortgage payments every month.
So, there’s my plan for 2011. Get rid of the non-performers. Use the extra cash to offset debt which will drive cash-flow further upwards. Also, I’ll be looking at ways to drive rents up; ways to add value to our properties. Ways that tenants appreciate; ways that make tenants happy to pay a little more rent for the extra value they’re receiving.
My 2011 property plan: Drive cash-flow upwards!
What’s your property plan for 2011?