How to Build a Property Portfolio

Ever had the feeling that you’re missing out on great opportunities while others around you take advantage of the property market?  If you’ve ever thought about investment in property or building on your existing property portfolio, now is a good time to take the plunge and build the financial future you’ve always dreamt of.

Long Term Strategic Planning

You may talk of having “financial freedom”, but what does that really mean to you?  The key to growing a successful and sustainable number of investment properties is visualising what “financial freedom” actually means, and then working that into your long-term strategic plan.  Property experts who have a string of real estate investments will normally tell you that going into this type of investment without a solid and thoughtful strategic plan can mean making poor decisions and costly mistakes.  Most property experts suggest that investment should be entered into with at least a 10 year plan in mind.  This helps your investments to “ride out” any short term dips or losses in the market, leaving them to grow in value over the longer term.

Before creating a strategic plan you should also think about your “risk appetite” – this is essentially the amount of risk, if any, you can afford to take on.  To answer this you can look at your current assets, income and your income potential in the future.  Remember that having a 10 to 15 year plan in which you want to buy more than one investment property can put considerable pressure on your short-term cash flow unless you have a realistic financial plan in place.  Building in a contingency plan (such as switching to an interest-only loan) for any investment is a sensible strategy, meaning that you will be able to cope financially in the case of a downturn in the market or if your personal income drops for any reason.

Buying investment property – whether it’s your first or one of many – can be challenging, especially without the right strategy or without experienced advisors helping you. Building a property portfolio involves reviewing your current position as well as making a range of decisions on issues such as:

• Financing options for purchasing properties
• Structures such as trusts and self managed super funds
• Tax implications
• Types of suitable investment properties, from existing houses to off the plan developments
• Properties within the local market and also interstate
• Ongoing rental returns and capital growth

Property specialists suggest that when you start on the journey of residential property investment you should contact a number of experts such as solicitors, accountants and property investment companies who have years of experience and can help you set up the right structure and systems that will support your strategic goals.  Your mindset will also affect your levels of success: having a determined and positive outlook while you’re keeping an eye out for investment opportunities can mean that you are more likely to build on your successes and not get bogged down worrying about problems that may never eventuate.