How to build a property portfolio from scratch

Buying property as an investment can be a good form of passive income, but having two, three, or more can be even better. It’s also a good way for investors to diversify their assets and capitalise on increased capital growth while generating more equity. Multiple investment properties are called a property investment portfolio. 

Building an investment portfolio can be challenging, but incredibly rewarding when done right. If you’re planning to expand your investment properties and develop your portfolio, here are a few tips to keep in mind: 

Define your investment goals 

Set yourself a specific, measurable goal and hold yourself accountable. Ask yourself questions like ‘What’s your income goal?’, ‘Do you want a short-term or long-term investment?’ and, most importantly, ‘What do you want out of your property investments?’ Answering these questions will guide you during your investment property search. 

There are generally two kinds of investment properties: those that offer high rental yield and can be ‘positively geared’, and those that offer high capital growth, in new or developing suburbs, attractive to families, with long-term capital returns. Figuring out which property type suits your investment goals can help your property search go much smoother. 

A balanced portfolio will typically include both high rental yield and high capital growth properties, in a variety of locations. It is difficult to find properties that offer both long-term and short-term gains. 

Develop an investment strategy 

Your strategy should complement your investment goals while centring around your income and financial capabilities. It’s not a good idea to go beyond what you can afford. Always look at the limits of your finances and work within them. 

You need to put down a deposit to invest in a property, which may be affected by your strategy, whether it’s aimed at investment properties with high rental yield or high long-term capital gain. Use our borrowing power calculator to see how much you may be able to borrow for your investment property. 

If you’re unsure about the right strategy to adopt, you could seek professional counsel. Speaking with an investment professional can help you work out a strategy that works with your goals and finances. 

Recognise the possible risks  

There will always be risks when it comes to investments. It’s not something you can go into blind and expect a good result. Property investments, in particular, can be a bit trickier because of the many localised real estate markets you need to look into. Some property markets shift quickly, and what once was a promising seller’s market could change into a buyer’s market in a flash. 

Understanding the risks involved is vital when building a property portfolio. Knowing the potential pitfalls of property investment can help you avoid them and make more informed decisions. This could also help you create a better investment strategy to mitigate the risks. 

Do extensive real estate and property research 

As said previously, real estate has very localised markets. Similar properties in different suburbs can have wildly varying property values and rental yields. There are also times when local market trends don’t follow the nationwide forecasts. If you’re investing in real estate, look into individual suburbs carefully. 

Analyse the market trends, including the median property prices, rental yields, and current housing stock. If you want a more detailed overview of the suburb, it’s best to use tools like suburb reports. At loans.com.au, we provide free suburb reports that can help you with your comparative market analyses. 

When researching suburbs, you need to look beyond property prices. Familiarise yourself with the locale’s demographics, local amenities, infrastructure, economy, and future developments, which all influence property values and potential rental yields. 

Choose your first property carefully 

The first property can determine the success of your whole investment portfolio. If that first property investment doesn’t pan out as expected, your future investment plans could be delayed, or you may have to rethink your strategy, which can cost you time and money. 

When choosing a property, you have to make sure it’s in line with the demands of the area and your property goals. Suppose you want to rent out your investment property for high rental yields, then it’s important to find a house or unit that meets renters’ needs and expectations. This is why researching the area is so important, as well. 

You can learn more about a property by getting a detailed property report. These reports usually include the estimated market value of the property, market comparisons, and property mapping. You can get a free property report from loans.com.au. 

Find the right investment property financing 

Last but certainly not least, you need to find the right investment home loan. All the investment planning won’t come into reality if you don’t have the funds to make the necessary purchase. 

When searching for an investment home loan, always look at the comparison rate, as this will show you the true cost of the loan. You should also consider loan features that can help you manage payments and save money. To understand the implications of investing, speak with a financial advisor or tax expert.

If you’re looking for discounted rates, low fees, and useful features, check out loans.com.au’s range of investment home loans. Get in touch with our friendly lending specialists by calling 1300 756 598 to learn more. Or apply online now and get a head start on your investment journey. 

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