How To Build A Property Portfolio?

Is property a good investment for doctors?

Investing in real estate has many benefits:

• For doctors, obtaining finance for property investment can be much easier than it is for other borrowers
• It has the potential to produce capital growth and rental yield. The power of compounding returns means property investment can be a good investment.
• It typically generates robust long term returns.
• It helps to build equity as the property value appreciates. You can use the equity to invest in other properties.
• You can often borrow the entire costs associated with investing in property.
• Negative gearing benefits.
• It is an excellent retirement nest egg.
• You can manage your cash flow through rental income.
• It’s easier to understand than other investment opportunities.

However, investing in property is not without risks:

• The property market will go through cycles, and it may not always generate the return you expect. However, it is not as volatile as the share market.
• Property investment requires many thousands of dollars.

Why are doctors interested in building a property portfolio?

• Tax savings is just the icing on the cake.
• Since you’re considered a low-risk borrower, lenders waive lenders mortgage insurance, even when you’re borrowing more than 80% of the property value.
• You don’t have to save a large deposit, since most lenders offer between 90% to 100% investment loans for most doctors.
• Due to the nature of your profession, you’re likely to be more financially secure than other borrowers.

So, what is a property portfolio?

It is a collection of investment properties, that is either owned by an individual, a trust or a company. Many doctors limit their property purchases to a family home and a holiday home and fail to explore property portfolio opportunities.

How do I build a property portfolio?

• Choosing the right location is important when building a property portfolio. Don’t put all your eggs in one basket. Spread your investments across different areas to increase your chances of capital growth or rental yield each year.
• If you own a home, use the equity to invest in a second property. It’s good practice to know the ballpark value to ensure the assessor is not undervaluing your home.
• Define your investment strategy, whether you want to focus on rental yield or capital growth. As a doctor, you can prioritise a capital growth strategy since you can cover the investment loan cost.
• Consider the structure. Do you want to go at it alone, or with a trust or company?
• If you’re aiming for a positively geared property, go for rental yield. A positively geared property is one where the rental income is higher than the costs of owning the property.
• You can also choose to negatively gear your property as the loss from renting the investment property can be offset against your salary and reduce your total taxable income.
• Do not cut corners and settle just because you’re time-poor. Take advice from professionals who can help you choose investment-grade properties that can provide rental yield and capital growth.
• Be aware that when it comes to off-the-plan investments lenders are more conservative.
• Consider putting money in your offset account, so you pay less in interest. Access the money in the offset as a deposit for another property.
• Consider a split mortgage – where a certain portion of your investment loan is fixed, and the other is on a variable rate home loan.

How to choose the right location to build a property portfolio?

• Look for areas with steady population growthThere should be employment diversification
• Research building permit approvals and the vacancy rates to avoid areas with an oversupply of housing.
• The rental level trend will indicate how much tenants are willing to pay and can pay.
• Investigate areas were major infrastructure projects are underway.

What are the common mistakes when building a property portfolio?

As first-time property investors, doctors can make the following mistakes:

• You do not claim for full tax entitlements related to tax depreciation and negative gearing.
• You buy an investment property close to your home, instead of venturing into other areas.
• You were swayed by the opinions of your friends and family instead of seeking independent advice.
• You overestimated the rental returns.
• You chose the wrong loan, i.e. instead of interest only, you decided to pay both the principal and interest. The interest paid on the investment loan is tax-deductible during the interest-only period.
• You bought in an area that doesn’t appeal to tenants.
• There is an oversupply of property, which leads to low rental income and limited growth rates.
• You are selecting your tenant instead of using the help of a qualified property manager.
• You bought the property to suit your lifestyle instead of your tenants’ lifestyle.
  A cornerstone of a strong property portfolio is making a good start. If you did invest in an underperforming property, sell it fast and learn from the mistakes you made.

How many properties should I have in my portfolio?

There is no magic number as to how many properties you must have in your portfolio. Try to aim for high-quality properties that will deliver strong growth in the long run and properties that provide passive income.

How can we help to build your property portfolio?

• Some of our mortgage brokers are seasoned investors who have had experience building a property portfolio.
• We have over 50 lenders on our panel, each with varying policies that can cater to your investment goals.
• Our mortgage brokers know the lenders’ lending criteria and recommend the right investment loan product that suits your property portfolio needs.
• We can assist with the barrage of documentation and application forms you need to fill in.
• We will make sure you can meet your settlement deadlines without hassling you during the investment loan process.
• We will work out your financial situation and help to maximise your borrowing power.

Are you planning on building a property empire? Our mortgage brokers can help you on your journey. Call us on 1300 889 743 or enquire online.