Everybody knows the almost cliche golden rule of property: Location, Location, Location. However, I believe this is overly simplistic and does not guarantee a successful outcome for property investing and long term wealth creation. I bought my first investment property at age 17, and looking back, I would never have expected my portfolio to have grown so broadly across 6 countries, 4 continents and 5 sub asset classes/strategies. However, 3 rules have stayed with me and been the fundamental core consideration of my existing and future portfolio moves. These 3 rules may appear basic, but if you follow them - I believe your success will be almost assured. 

1. Cashflow is king

Whether it be investing in property, stocks, bonds, or even buying businesses: cash flow is king! I lived through the 1980s where Australia mortgage rates hit +15%, and I experienced my loved ones having their houses foreclosed because they did not have enough cash flow to cover interest repayments which were too burdensome. The property may have been the best house in the best street of one of the best suburbs in Australia, but that didn't matter because there was lack of positive cash flow. When modeling up everyone of my prospective property investments, I pay particular attention to cash flows. And indeed, I always add enough buffers for margin of error as possible. This includes seeing if the property still has ample cashflow should; mortgage rates go up another 2 percentage points; vacancy rates hit +10%; and average monthly rental falls 10%. This may sound overly cautious, but I prefer to know that the property has enough cashflow buffer so I can sleep well at night. You never want to be a forced seller. 

2. Always protect your positive equity

This means that you should always be in a position where your assets minus your liabilities results in a positive balance. Never over leverage yourself, no mater how great the property is or how good the location is or how much the property is a "once in a lifetime" opportunity. Things change, markets move, and you don't ever want to be in a position of negative equity. Negative equity is death to many people financially. I know of a number of experienced property investors with well diversified and high quality portfolios who have come unstuck by over leveraging. Typically as a rule I never let my Loan to Value Ratio (LVR) of my total portfolio go above 60-70%. And actually, I am more comfortable with a LVR closer to 50% LVR.

3. Removing emotion

Property is something I love investing in. It has enabled me to achieve financial freedom at an early age. I now lucky enough to pursue my own business helping others invest in property and other asset classes. However, property is just a spreadsheet of numbers to me rather than bricks and mortar. Whenever I purchase property, I try to remove all forms of emotional attachment. And purely focus on the numbers. I know a number of friends who have fallen head over heals for their dream property on the beachside of some exotic location, or ski resort, or palace in the best bragging rights suburb. But for me, the best property I have purchased has often been the ones that are the least attractive and most generic, yet have the best cashflow, capital growth prospects and financing structure. Take emotion out of the equation it's all about the numbers!

The above rules have been tried and tested by many investors smarter and more successful than myself. These are golden rules of property which I strongly believe allows one to have the best risk reward balance for successful property investing. Connect with me on LinkedIn if your would like to know more.