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Expanding from one investment property to multiple active investments is easier said than done. A successful property portfolio takes a lot of planning, research, and strategic financing.
In this article, we outline the key steps involved in building a property portfolio.
Define your investment goals
If you're serious about building wealth through property investments, you need to have clear goals in mind. What are your short-term and long-term goals? Do you want to focus on generating passive income, building equity, or a mix of both?
Your investment goals guide your decisions and overall strategy. Ask yourself what you want out of your real estate investments before buying your first property. Having defined goals also gives you solid benchmarks, making it easier to see progress and know whether you're on the right track.
Know your borrowing capacity
This is based on your income, living expenses, existing debt, and credit history. Your borrowing capacity determines your budget for the first investment property in your portfolio. You need to know how much you can afford to borrow and how much deposit you need to put down.
As an investor, there are a few avenues available when buying real estate. For example, instead of buying a property as an individual investor, you could invest through trusts or explore your SMSF property investment options.
Take note, the structure you use to buy your property may affect your borrowing capacity. Consider your options carefully to determine which best suits your needs and investment goals.
Arrange your investment property finance
Once you've figured out your purchase structure and budget, it's time to start looking for the right loan. In addition to minimum deposit amounts and interest rates, consider features such as offset subaccounts, interest-only repayments, unlimited repayments, and redraw facilities. These features could help you save money while making the loan easier to manage.
At loans.com.au, we know that every investor is looking for a finance solution that's tailored to their needs. That's why we have a range of investment home loan options for you to choose from.
Whether you want to keep it simple with a Variable Bare Investment Home Loan, get a fully featured loan with the Variable Bold Home Loan, or bundle your investment loan with an owner-occupier mortgage with Variable Bold Investment Bundle, we can help you find a suitable loan.
Getting a pre-approved home loan could help you better understand your financial position. With a pre-approved loan, you'll have a clearer understanding of your borrowing capacity, helping you buy with greater confidence. You can pre-qualify for an investment home loan at loans.com.au to get started.
Buy an investment property
A property portfolio begins with one property. The success of your first investment property will impact the rest of your property portfolio.
Do your research about the different types of properties available on the market and narrow down where you want to buy. Search for suburbs with strong rental demand or strong potential for capital growth. Understanding the local property market can help you identify trends and uncover investment opportunities.
If you have a pre-approved investment home loan, you can streamline your search and only view properties within a certain price point.
When buying a property, don't focus on the purchase price alone. Consider other expenses such as maintenance, management costs, insurance, council rates, and the like. These individual fees may sound small at first, but they can quickly build up and take up a significant portion of your budget.
Leverage equity and diversify investments
After purchasing your investment property, watch it closely and allow equity to build over time. You can leverage your equity by refinancing your existing investment loan and using it to buy your next investment property.
As you build your property portfolio, you continue to build equity, which can be used to purchase more properties.
When choosing your next investment property, consider different suburbs to diversify your investments and mitigate risks. Closely monitor cash flow, expenses, and serviceability when refinancing your loan.
Disclaimer: The information provided in this article is general in nature and does not constitute financial or legal advice. Please seek professional advice tailored to your personal circumstances before making any financial decisions.
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