Tips for recession-proofing your portfolio – Chris Gray

In today’s show investor and commentator Chris Gray speaks about how he has recession proofed his portfolio.


Kevin:  As we round out 2015 and head towards a brand new year, it’s a pretty good time to be thinking about your portfolio and how you should be recession-proofing your next investment property as you build your portfolio. Chris Gray is a great friend of ours, a media commentator, a property expert, a TV presenter, an author, and a speaker.
Gee, you’re pretty busy, Chris.
Chris:  It sounds as if I am, but the great thing is with media, you can do it absolutely anywhere in the world and you can leverage and send to thousands of people, so it’s all about efficiency.
Kevin:  Indeed it is. What’s your strategy for recession-proofing property?
Chris:  I think the biggest thing is it’s in the quality and the location of the property you buy because like in any recession, you find some businesses do the most amazing business in the recession and not everyone is affected. The main thing with property is if you buy the right property in the right suburb that is attracting the right tenants, there’s no reason for it necessarily to be affected.
Kevin:  Does it always have to be in a blue-chip area, Chris?
Chris:  It doesn’t. There are always exceptions to the rule, but I always find that if you stay around main capital cities, there are so many different industries supporting those capital cities that even if one or two industries are put down, there are certainly enough people employed in the other locations versus obviously, if you’re in a one-industry town in, say, mining, for instance, it’s hard to fight back in Perth if the whole mining industry is going down.
Kevin:  With your portfolio, when you’re looking for a new property, do you always look for something you can add some value to, and does that actually help?
Chris:  It always helps if you can add value, but for Sydney, for instance, where I’ve been buying, it’s such a heated market, I always say I’d rather buy fully renovated today where I can add no value than buy unrenovated tomorrow, because it might take me three, six or nine months to find something unrenovated and in that time, where I might have made $20,000 or $30,000 on the renovation, I might have paid $50,000 more in the price. It’s all about trying to put things into perspective.
Kevin:  How important to you is your buffer? I imagine, if we’re talking about recession-proofing your property, you’ve got to be prepared for any sort of economic situation that might come up.
Chris:  Exactly. In every part of the business world and investing world, they say cash is king and no much more than property. The majority of times people lose money in property is when they’re forced to sell, so if you have cash on hand, just like working capital in the business, even if your tenants move out, or interest rates go up, or you lose your job, if you have cash on hand that can last you maybe one year to three or even five to ten years, then that means you don’t have to sell it and so the chances are if you can hold on, in time, residential property does always come back.
Kevin:  You’re a professional investor. You’re in the industry. Do you have someone look after your properties, or do you do it yourself?
Chris:  I do absolutely nothing myself. I always think there’s always someone better who can do it much better than me so I have property managers based here and over in the UK. I say, “Look, if the repair bill is under $500 or even $1000, just get on and fix it. I can’t fix the leaking tap or negotiate a better price, so just get on and fix it.”
I have about 14 properties, and I probably spend half an hour a month. I literally just have an Excel sheet. I count 14 rents coming in, 14 rents going out, and if ballpark the numbers are roughly right, then that’s all I do.
Kevin:  How often are you checking those against the market to make sure that you’re keeping up with market conditions?
Chris:  To be honest, I don’t. I just believe in having the right property managers who do their job. They have an incentive that the more rent that they get me then effectively, they charge a percentage of that so they make more money, and at the same time, they won’t go and rent something to try to get another $50 a week if it’s going to risk losing a tenant for a few weeks because they know at the end of the year, then it’s going to cause more grief. It’s all about having a balance between getting a reasonable amount of rent and ideally, virtually no vacancy.
Kevin:  Chris, great talking to you, mate. Chris Gray, thank you very much for your time.
Chris:  My pleasure.

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