STEP BY STEP CHECKLIST FOR BUILDING A PROPERTY PORTFOLIO!
Investing in property is a good way to increase your income and make sure that you’re growing your money. But in order to achieve that higher income and financial security, you need to build a good property portfolio. Starting to build a property portfolio can be quite daunting, so you need to be prepared. Don’t worry, we have something that can help you:
Step 1: Talk to your bank.
Your lender or your bank can help you figure out how much your current property may be worth and its equity. Equity is the difference between the property’s market value and the amount you still owe the lender. For example, your home’s market value is $250,000 and you still owe the lender $100,000, you have equity worth $150,000. You can use this equity to buy your first investment property. However, you should have enough equity. Otherwise, you may need to give it more time to grow so you could use it.
Step 2: Formulate an investment strategy.
Before you start looking for properties, determine your strategy first. Do you want rental yield or capital growth? Do you want your property to be negatively or positively geared? Let’s explore:
Rental yield is the percentage of returns from the rental income the property generates. On the other hand, capital growth is the appreciation of the property’s value over the years compared to its value when it was purchased.
A positively geared property is a property with greater gross income than the ongoing costs of owning the property. You can cover mortgage repayments and other expenses in running the property and still have income. However, this will also mean that you’ll have to pay a higher tax at the end of the year.
On the other hand, a negatively geared property has a lower income than the ongoing costs of owning the property. These losses can be offset against your salary, which will reduce the income tax you have to pay.
Seek professional advice before you decide and make sure that your strategy is beneficial to you.
Step 3: Choose a property.
After setting up a strategy, you can look for a property. Make sure that you buy in a location near amenities such as transportation, shops, parks, schools, and the like. Once you’ve picked a location and a property, work out how much you’ll need to borrow and how much are the repayments. Also, make sure that you have a budget for all other expenses involved in getting an investment property such as council rates, maintenance, management fees, and during periods where the property is vacant.
Step 4: Find a property manager.
They will help you with the paperwork, finances, looking for tenants, and all other matters related to managing investment properties. You can do it by yourself, but with other responsibilities you have in your life, you might just end up in burnout and not manage the property well. Having someone do the work for you will not only ease your responsibilities but also ensure that your investment is thriving.
Step 5: Commit to the long term.
Building a property portfolio means you should be committed to this venture for the long haul. Some experts say that the rule of thumb to gain the best benefit from your investments is to hold on to a property for at least seven years. Build your portfolio slowly but surely, and remember to pick quality over quantity. This holds true to properties and tenants—make sure that you take the time to pick carefully so that you will get the best returns possible.
Investing in property and building a property portfolio is an exciting yet also daunting task, as nothing is set in stone and there are many risks involved. So make sure that you do as much research as possible and ask for professional advice to reduce those risks.
If you need a property manager or looking for your first investment property, we can help you! With our years of expertise, we’ll assist you in building your property portfolio—just ring us anytime!
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