5 Golden Rules For Building Your Investment Property Portfolio
Like anything else in life, learning how to buy property for investment takes time and effort, but the benefits you’ll receive far outweigh the effort you need to put in.
To help ease the learning curve a bit it’s helpful to have a few hard and fast rules to keep the process moving along towards a great result.
The following 5 rules are followed by countless individuals who have bought property for investment purposes:
1. Pay under market value with add value potential (if possible)
Buying an investment property under market value can be difficult, but it’s not impossible.
To get property at a discount consider the following.:
- Why is the vendor selling? Do they have an offer on another property? (could mean they want to sell quickly)
- Study the market; what makes the property desirable? Is there something that I can do to add value and increase my yield? Is the market bearable and sustainable?
- What blemishes can be used as leverage to get a better price?
- Speak with local agents to get a good feel for the suburb.
2. Look for properties with good yields and cash flow
A property for investment should have a rental return that’s higher than the suburb average.
Look for an investment property with a yield of at least 5% for the best results.
Here’s how to quickly calculate the gross rental yield of an investment property.:
- Weekly rent x weeks in the year = Annual rent/purchase price x 100
- $475 pw x 52 weeks = 24,700/$450,000 x 100 = 5.49% gross yield
Of course your true (net) rental yield will deduct your investment property expenses such as strata fees, utilities, property management fees, etc. from the annual rents.
Annual rent – costs (excl. interest)/purchase price x 100 = net yield
So as you can imagine, the higher your gross yield, the better your net yield will be.
3. Buy property for investment in other states
Australia does not have a single property market.
We have many markets all across the country, each of them with their own individual nuances (e.g. popular suburbs, employment outlook, demographic, etc.).
This is why it’s so important not to get caught up in the claptrap and gloom and doom that permeates so much of the information we come across.
If your backyard is on the tipping point of growth, then by all means invest where you know, but if you really want to experience faster growth, you’ve got to learn how to invest across state lines.
4. Outsource where practical
You’re not simply buying property for investment, you’re building a business.
That’s why it’s vital you make the most of the time that you have available by outsourcing tasks; especially time consuming ones that can be done by someone else.
Following are some examples of tasks you can outsource.:
- Property management
- Cosmetic renovations
- Home staging
- Cleanup and removal services
5. Consider “rent-vesting”; renting while buying investment property
There are both advantages and disadvantages to renting while buying a property for investment.
Following are some pros and cons surrounding this strategy.:
|A smaller deposit can put you into the real estate market faster.||At the mercy of landlord who may want to increase rents or ask you to move out.|
|Buy where you can afford, live where you want.||You can’t make changes to your rental.|
|Tax/income advantages that owning your own home doesn’t offer.|
|Build wealth through capital gains.|
|Flexibility of moving when and where you want – without incurring fees like stamp duty or loan penalties.|
These were just some of the tips and strategies that property investors need to learn to grow a strong investment property portfolio.
One of the best things you can do for your property investing business is to find a successful property mentor to help ease the learning curve.
This can speed up your results because you’re not travelling down the wrong path and making mistakes that cost you in both time and money.
If you are interested in discussing similar matters with like-minded property investor people and professional coaches, feel free to join us at our next FREE Investor Property Night near you!
You need that income! One of the primary things you need to be a successful property investor is a job. Why? Because you need money. You need a job to borrow money. You need savings or some cash to buy your first property. But the sad fact is, a lot of people...
Get There Faster If you are already a property investor with one or even two properties, first of all, congratulations. You’ve taken some seriously great steps in creating your future wealth and a pathway to a work-less, play-more retirement with passive...
When it comes to property investment there are some things you can never have enough of.
When it comes to property investment there are some things you can never have enough of. Good tenants, reliable builders, a great relationship with your bank.
But more than anything what you need is good cash flow.
Having a steady income of cash means never having to dip into your own pocket to top up repayments, complete repairs or make another purchase.
Here are the top five ways you can ensure the cash keeps flowing, so you can keep your investment portfolio growing.
Don’t be caught without it.
As a property investor who is building a portfolio, it’s vital that you have access to your equity whenever you need it.
There’s nothing more frustrating than finding that perfect new property to purchase, only for it to be held up – or worse still, lost completely – because your finances weren’t in good shape.
Having an interest-only loan structure with a healthy off-set account is a great way to ensure you have equity at your fingertips whenever you need it, but that’s not the only way…