6 tips for a multi-property investment portfolio
Have you been considering entering the property investment game? It has the potential to provide you with substantial profits, effectively securing your retirement. Despite its relative simplicity, it shouldn’t be deemed as easy – if it was, then everyone would be a millionaire!
In order to build a performing multi-property portfolio, you need to be committed to the cause
While you can receive a great deal of assistance from a buyers’ agent, it takes a significant amount of strategy, research, hard work, risk and time to make inroads into the property investment market.
For example, let’s say you had purchased in Sydney or Melbourne even just a year ago. You would now be licking your lips, as figures from CoreLogic RP Data reveal that property values in Australia’s two largest cities surged 15.56 and 12.78 per cent respectively in just the 12 months to October 2015.
This would effectively enable you to utilise your newfound equity to purchase another investment property. Provided you made an informed decision (a property agent can help here), you would then be benefiting from two profitable properties, allowing you to work your way up the property ladder quicker as you add to your portfolio.
In order to build a performing multi-property portfolio, you need to be committed to the cause with a keen interest in investment, a desire to grow your financial future and have expert counsel from someone in the field, like a property buyers’ agent.
Here are a few tips for constructing your multi-property portfolio:
1. Make a plan and stick to it
The first thing you need to do is identify the exact reasons why you want to build a multi-property portfolio. This will help you to set both lifestyle and financial goals, which will give you something to work towards.
There is no one-size-fits-all approach when it comes to investment planning – it has to be unique to your individual needs, income and desired outcomes for the future.
Once your aims are clearly set out, you need to apply your due diligence to work out how you’re going to go about it. Your buyers’ agent will be able to assist in creating a unique plan for your requirements, including setting the next steps that you need to take to achieve your investment ambitions.
2. Choose the right suburb
The Australian Securities and Investments Commission stresses the importance of doing your due diligence when it comes to choosing the right suburb for your investment.
They use the example of the Gold Coast, which had many investors clamouring for property in 2008 as real estate prices soared, only to then fall substantially over the ensuing five years, hitting many people in the pocket.
To avoid this situation, you need to allocate a considerable amount of time to research. Among other things, the ASIC recommends looking out for suburbs that:
- Have had strong and consistent growth over the last few years
- Are cheaper than surrounding suburbs
- Have easy access to amenities like shops, public transport and schools
- Have positive developments in the pipeline like new infrastructure
A property buyers’ agent will have intimate knowledge of various markets within markets, and will be in a prime position to offer informed advice.
3. Choose the right property
A successful portfolio will be determined largely by the kind of property you buy. Having an empty rental property can be quite costly, therefore it’s vital that you choose a home that has a low chance of vacancy, and can be easily sold in a worst-case scenario.
The ASIC suggests looking for properties that:
- Are below the suburb’s median prices so they have room to grow
- Have experienced solid capital growth over the last 10 years
- Are easy to maintain
- Have a healthy rental yield in relation to the purchase price
4. Expand your portfolio
So, you’ve made a profitable decision thanks to research and advice from your buyers’ agent, and your property is performing well; now what?
Provided you are in a financially secure position and are comfortable with taking on more risk, you should consider using making your second grasp onto the ladder and adding another property to your portfolio.
It’s vital that you follow the same method as when you bought your first property, as quantity is far less important than the quality when it comes to investment portfolios.
In an exclusive interview with Domain, Property Women member Carmella Rowsthorne asserted that “you might have four properties and they may give you the same result as 10”.
It all comes down to utilising your buyers’ agent’s expertise in the field and making informed decisions.
5. Branch out
It’s important that your portfolio is varied, both in geographic locations and the kinds of property you own. Figures from the Australian Bureau of Statistics show that the bulk of the nation’s population is focused in the capital cities, but the markets are significantly different from city to city, suburb to suburb and even between streets.
Allocating your investments to different areas and types of property can help reduce the risk and insure your portfolio against any sudden falls in particular markets.
6. Use a property investment manager
Can you imagine maintaining a multi-property portfolio by yourself?
Managing one investment property is hard enough, but can you imagine maintaining a multi-property portfolio by yourself?
An investment property manager will be able to take care of the whole process for you, including advertising for tenants, dealing with any demands, arranging necessary maintenance or repairs, collecting rent and conducting regular inspections to ensure your home is in safe hands.
They can even offer advice on the future of your property portfolio, helping you to achieve your investment goals.