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In the January 2010 Issue of Property Investor News
Measuring Performance
Many of our readers will remember the last property price slump and some will remember the one before that also. During both of the previous property 'crashes' buy-to-let mortgages did not even exist so more experienced investors may already know how to get around problems like the lending limits recently implemented by lenders and the lack of availability of high-LTV loans. But regardless of how you raise the finance to keep buying property, the outlook for price growth over the next few years still looks uncertain, so what better time to focus on what you already have and analyse how your portfolio is performing?
This analysis should go beyond the obvious 'am I breaking-even on my rental income' because hopefully you will have some equity in your portfolio, so you should at least calculate what your annual return on that equity is. But what aspects of your accounts should you be focusing on and what comparison measures should you use to assess your portfolio's efficiency?
Different investors will need to focus on different things and there is certainly no 'one-size fits all' with regards to property investment methods or analysis. For example, if two investors disagree on the ideal level of equity that should be kept in a portfolio, with one believing 50% and the other believing 80%, in a decade of rising property prices the investor geared to 80% will consider himself a genius, but if prices crash by 30% he will be considered a fool and will possibly go bankrupt.
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