How to Build a Stable Investment Property Portfolio

By June 29, 2018Landlord Tips

Building an investment property portfolio doesn’t simply happen by chance. It takes years of planning and commitment to build a property empire, and strategy is your best friend. While there’s more than one way to secure an impressive portfolio, we’ve put together some hot tips for beginners to help you achieve your goal.

Start on the right foot

Your first investment property plays a key role in allowing you to buy your second and third investments. An investment property that performs well means you can make consecutive purchases sooner. Generally, if your investment cannot return your deposit within two years, you risk becoming stuck. Having to wait a very long time before you’re able to purchase again severely impacts the growth of your portfolio. Therefore, it’s important to conduct thorough research and buy a property that has high potential for capital growth or value-adding.

 

Understand your financial situation and goals

Like anything in life, a goal without a plan is just a dream. In order to begin your investment property domination, you must first have comprehensive knowledge of your financial capacity. Be realistic in your goals: you cannot support million-dollar ambitions on a mediocre income. But that’s not to say you’re out of the game. You just need to adjust your goals to align with your reality. Either start small and work your way up, or increase your sustainable annual income.

Read, read, read

Knowledge is everything. The more you immerse yourself in real estate, the more you learn about the industry. Property investment is about making money and therefore you should treat it like a business. If you’re serious about your portfolio, never stop learning. Having your finger on the pulse will prove to be invaluable time and time again.

Prepare an investment plan

Making a profit from real estate is more than just buying and selling. You need to have a very clear idea of how you’re going to make money. Will you renovate your first property to quickly build equity? Do you have the available funds for such renovations? You need to think ahead to your fourth and fifth purchase while still on your first, so ask yourself this:

  • When will I make money from the property?
  • How will I fund the next property?
  • Where is the next deposit coming from and how much will I need?
  • Is the property I’m purchasing now going to help me with my next purchase, or will it set me back?

Cut your losses

You don’t always get it right the first time, sometimes even the best laid plans fall through. But holding on to a dead investment is about as useful as throwing money into the fire – although at least a fire would keep you warm. If your investment property is not performing and has limited growth or value-adding potential, let it go. You’d be better off putting the money towards another deposit while you continue to expand your knowledge about portfolio strategies.

Rinse, repeat

Once you’ve bought your first successful investment property and have added considerable value, you can draw on your equity to buy another property. This is how the process works. Getting started is always the hardest part, but over time you’ll recognise the market trends and know when to pounce.

The real estate market is a fraught field. While there are multiple ways to make money, some strategies seem to have more success than others. Building a stable investment property portfolio does require a bit of market nous, but beyond that you will also need a stable income, a little bit of patience, and a strong desire to succeed.

 

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