Buying one property as an investment can be a good form of passive income, but having two, three, or more can be even better. Multiple investment properties are called a property investment portfolio.
Building a property portfolio from scratch sounds hard or even impossible, but this isn't the case. With the right mindset, the right strategy and plenty of research, you may be able to buy yourself two, three or more investment properties.
Let’s take a look at some of the best options to build your portfolio investments from scratch:
Equity is the difference between the current value of your home and how much you owe on your mortgage balance. For example, your house is currently valued at $400,000 and you still owe $200,000. You would have $200,000 in equity. If you’ve built equity over the years, you can use this to buy an investment property. This can be a good way to get your first property in your investment portfolio.
Buying a property with someone can make it more affordable to get onto the investment property ladder. However, this can be quite tricky because misunderstandings may occur down the road. So it’s important that both you and your partner have the same investment goals and strategies, agree with the terms and conditions, and with the ownership structure.
Rentvesting is when you buy an investment property to lease out, and then rent a property to live in. This strategy gives you the ability to maintain the lifestyle you want, while being able to start your investment portfolio.
Positive cash flow is where the rent is higher than the mortgage repayments and expenses. This means your rental income can cover the monthly repayments. If you create positive cash flow in your investment property, and you continue to purchase investment properties that generate positive cash flow, you will be able to service the loan and buy more property to build your investment portfolio.
Capital growth is not the only way to increase your rental income and value of your property, you can also do this by renovating your investment property. You could renovate the kitchen or bathroom for a better rental return, or you can also do minor renovations like a new coat of paint or a new carpet. Increasing your rental income can help you service more properties and also increase your equity which you can use to buy even more properties.
There are plenty of other options to start building your investment portfolio. You can check out our investment loan products to get you started.
19 October 2014
When it comes to creating a property portfolio, what type of properties are the best ones to purchase for your future?