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Bryce Holdaway Blog post by Bryce Holdaway

Defence: What is that?

What I want to have a quick chat about today is something a lot of property investors haven’t got time or the headspace to think about. And that is their position of defence.

We talk about it in our business model: ABCD. The asset selection (A), the borrowing power (B), the cash flow management (C) and the defence (D). But let’s be honest: there is a lot going on in the ‘ABC’ that the poor old ‘D’ is not really considered enough. In my view, D is unbelievably crucial.

If you think about it, we have to defend our assets—we have to defend our income, and we have to defend our lifestyles. Most people are quite comfortable in defending their assets, in particular their home. They will get building insurance to make sure that, in an unlikely event something happens to it, they are covered. As a property investor, they will get Landlord Protection Insurance, which also covers them from the “tenant from hell” and against any liability.

But do you think about what happens if you lose your income?

Think about that. The whole portfolio that you were building through the accumulation phase relies on you having your income. This is where a lot of people have anxieties on whether or not they will lose their job. So by going to a suitably qualified and competent financial planner, they can help mitigate that risk by putting some protection around their income in the form of Income Protection Insurance. What that does is, if for some reason outside of your control, you are in a position where you can’t earn your income for a short period or even a longer period of time, you are actually covered. You will get some money coming into the household that allows you to meet your obligations and ultimately take away some of that fear that people have around getting into more debt. So it’s important that we defend our income as well as protecting our asset.

The other thing that we need to defend is our lifestyle, and by that I mean, what happens if you lose your income indefinitely or even forever? Something that happens to you, getting into some traumatic event. You work with your hands, and you cut off your hand. You get cancer, or you get something unforeseen, which means you are no longer capable of earning your income. That can be pretty scary for a person to go through—mentally, let alone being able to take care of the portfolio they’ve build for themselves and their family.

So for me, it’s really important, especially if you are building your portfolio that you think about it. If you talk to someone who can put that defence in place for you; you can sleep so much easier at night with the thought of building a portfolio. Because in our view: we can help you conservatively build the portfolio, pay off the principal place of residence, buy 3 – 5 investment properties on average and towards the end of the portfolio, we can help you retire the debt. We are not talking about leveraging yourself to extreme levels—but we are talking about putting a safety net in place, in the unlikely event something happens to your income or your lifestyle, so that you can protect your portfolio.

So, today my question to you is: have you thought about defence? Because in my experience, not a lot of people actually have. If you haven’t, you need to reach out to a suitably qualified financial planner so they can have that discussion with you and put a protection-mechanism in place for you so you have a really rounded portfolio. You get the asset selection right; you get the structuring right around the borrowing; you’ve cash-flowed it down to the granular level in your household; and then you put that defence in place. You can sleep very comfortably knowing your financial future—and the future of your family—is being very well protected and also has the best chance to grow in value so that you can achieve your financial outcomes.


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