Brett’s “cash house” strategy

Posted on March 20, 2005 in Cashflow, Educational blog, Emotions, Property, Strategy

Hey guys,

This strategy goes against every other strategy that l speak about because this strategy is not about maximising your return on investment, it’s simply about saving your portfolio should you be faced with worst case scenario, it’s an insurance policy for your portfolio.

Cash house put simply means that you have one or more properties which have little or no mortgage on them. lf you get to the point of worst case you can sell or mortgage the property and pull a large amount of cash out to fund you through the difficult cashflow periods.

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This is your safety net and should only be used as such. It should never be used to purchase additional properties. If your portfolio consists of less than 5 or 10 properties l generally don’t recommend this as it can take up too much of equity, slowing the growth of your portfolio. In a small portfolio, equity is key, in a larger portfolio safety begins to play a bigger role. This is where cash house can play a role.

There are a number of ways you can structure cash house, let’s look in order of best to worst:

You have a property with a redraw facility so the funds are on call if required
Your property has little or no mortgage so you would have to refinance in order to get the money
Rather than own a property you actually put aside the cash in a savings account.

How much to allow for worst case? I will normally tell people that you need to buy time is a worst case scenario so l would allow between 6mths and 2 years of payments.

Live with passion,

Brett Wood