Building a property portfolio is a long-term investment strategy that can yield substantial returns when done correctly. Success depends on having a clear investment strategy, working with experts, and continually reviewing and adjusting your portfolio as the market changes. Be patient, plan carefully, and you can build a portfolio that secures your financial future.
What Is A Property Portfolio?
A property portfolio is a collection of all the properties an investor owns for building wealth. It can hold many kinds of assets in different locations.
By building a property portfolio, you can reap the following benefits:
- Maximise your chances of good returns by investing in properties in many locations and price ranges (diversification).
- Gain access to more equity, which can help you expand your portfolio further.
- Minimise financial risks in case a property investment fails, through diversification.
- Increase profitability from rental yield and property value.
- Create a unique strategy for future investments through trial and error.
- Achieve your financial goals faster.
How To Start Building A Property Portfolio
The right strategy for building a property portfolio is unique to each individual investor. Here are some tips for beginner investors starting a portfolio.
1. Set Your Investment Goals
Your investment goals will dictate the sizes and types of investments that are most profitable for you. Setting a goal will help you create suitable investment strategies and make decisions more easily.
2. Plan Your Investment Strategy
You can invest in different types of properties, such as single-family homes, apartments, detached houses, and commercial sites. To maximise your return on investment, you can apply proven strategies like buy-and-hold, fix-and-flip, or renting out, which can be divided into two types:
- Rental yield strategies, like rentvesting, renting it out, etc.
- Capital growth strategies, such as buy-and-hold, flipping, etc.
Visit our article on how to choose the right property investment strategy for your goals.
3. Purchase Your First Investment Property
As real estate involves huge sums of money, due diligence is necessary for all property purchases, especially your first. The equity and profit from this initial investment will determine how quickly and effectively you can expand your portfolio.
Invest a feasible amount into a property with high growth potential to begin your investment journey. As it is your first purchase, consulting with experienced industry experts can help increase your chances of success. Mortgage brokers, real-estate agents and buyers’ agents can help identify the best property deals and loan options for you.
4. Expand Your Portfolio Steadily
After a successful first purchase, use the profits and equity from it to create a diversified portfolio. Investing is a long-term endeavour and requires patience, both while purchasing and selling.
Add assets within your budget after checking with a financial adviser. Be sure you do not overburden yourself financially. Before investing in new properties, learn about the upcoming trends in the market and how they will affect the prices of your investments.
Making an informed investment slowly is better than making an uninformed one quickly.
5. Diversify Your Portfolio
Building and diversifying your portfolio go hand-in-hand. Both contribute to increased profitability when done right.
Choose to invest in properties across various locations and asset classes to diversify, and use different investment strategies so you can understand which options are best for your financial goals.
If you have been investing within the city, look for properties in rural or regional areas. If you have been buying residential properties, you can navigate the commercial real estate market and apply new strategies suitable to those properties.
6. Track The Success Of Your Portfolio
A property investment portfolio is successful in the long term only if it continues to provide positive returns over the years. Keep track of all the purchases and sales, along with the strategies used for each property.
How Do I Measure The Success Of My Property Portfolio?
Use these metrics to determine how your properties are performing.
- Annual net cashflow: Calculate a property’s yearly income minus its expenses to check whether the property is making or losing money.
- Cash-on-cash return: Calculate net cashflow divided by initial investment to check how you are performing compared with market prices.
- Appreciation: Determining the increase in the value of the property over time will help you decide whether to hold or sell.
If these numbers are positive, continue expanding and diversifying your portfolio with a similar strategy until you reach your end goals.
Get Help From Experts On Your First Investment Property
We can help you purchase your first investment property and begin your portfolio journey by matching you with the right lenders for your circumstances. Call us at 1300 889 743 or fill out our free enquiry form for more information.