If you are a property owner thinking about diversifying your investments, you are probably wondering where to start when building a property portfolio. Depending on your personal goals, financial situation, and risk appetite, it’s actually not that difficult to start acquiring and managing more properties when you know the right steps.
What’s a Property Portfolio?
A property portfolio is a compilation of investment properties owned by either an individual, trust, or a company. Managing a property portfolio comes with many benefits as well as many risks that need to be managed.
The Benefits of Building a Property Portfolio
- It gives you a diverse income stream – Building a property portfolio can help give you multiple sources of income aside from your work, business, and other investments.
- You can gain more equity – By acquiring more property, you can gain more equity in the long run.
- You can increase rental profits – Over time you can increase rent on several of your properties that when combined can be a big amount.
- Lessens risks – Having a diverse property portfolio in different areas can lessen risks of losing money.
Here are some steps that you need to take and figure out so you can start building your property portfolio:
Tips on Building a Property Portfolio
1. Define your investment strategy
Keep in mind that there is not one correct strategy when building a property portfolio. What is effective for one investor, might not be effective for another investor. So before anything else, you must define your investment strategy.
As I mentioned, there are many different ways to build your property portfolio and one thing you need to make sure is that you maximize profits while minimizing your risks. Are you planning to earn through capital growth or rental returns? Do you think a buy-and-sell strategy will fit your goals? Or is short-term leasing like renting out your house for Airbnbs popular in your area? Take your time to research your options to know which investment strategy fits your goals.
2. Use your property’s equity
You can speed up your property growth by leveraging the equity you have in your current properties. Your bank can help you determine how much your current property is worth and how much equity is in it. Once you have enough equity in your property, you can use that as a deposit for your investment property purchase by borrowing against it.
Saving deposits can take a long time. By tapping the current wealth of your property portfolio, you can add more properties.
3. Choose the right properties
Choose the right property to invest in. Whether you choose to focus on high rental returns or capital growth, you must make sure that the property is worth investing in. The main thing to consider when choosing a property is the location, location, location. As they say, location is everything. It will define how fast your capital will grow in a number of years or how in-demand your property will be for rentals.
Hire an experienced buyer’s agent in your area to have an expert that will help you scan the market and give you vital insights. Aside from their knowledge and skills, buyer’s agents have an extensive network and can help you find good property deals that you likely wouldn’t be able to find on your own. Buyer’s agents can also negotiate for you and can possibly help you save thousands of dollars.
With these steps, you’ll be on the right track to building your property portfolio. The journey to becoming a property investor might not be easy, but equipped with the right tools and the right mindset, it will definitely be much easier. Set realistic goals, always research, manage your risks, and seek help from experts so that you can achieve being a successful property investor.
Get a free consultation from the buyer’s agents at Buying Perth Real Estate to help you get started on building your property portfolio. Contact Clive at email@example.com or give us a call at (08) 6215 0200 or 0412 926 190.