7 steps to a multi-million dollar property portfolio
The large majority of Australian property investors own only one investment property – so how can you stand out from the pack and build a multi-million dollar portfolio?
Many first-time investors have grand plans of building a large property portfolio, in many instances as many as 6, 8 or 10 properties, or even more.
While such goals are realistic and obtainable for many, the large majority of investors (72% according to statistics from the Australian Taxation Office) only own one investment property.
The key to building a multi-million dollar property portfolio is to follow 7 key steps.
The first step to building a massive property portfolio is to create a long-term plan. This will clearly state your property investment goals and outline how these can be achieved.
Your property investment plan should include your risk profile, current life/professional situation and financial capacity. You can then develop a long-term plan identifying the types of properties suited to your portfolio (villas, development or commercial, for example), the estimated time frames you can achieve those goals and what steps you need to take to achieve them.
The second step is to adequately organise your finances.
Most banks and brokers aren’t aware of the proper finance structure needed to build a large portfolio so it’s important that you deal with a broker who specialises in investment properties. This is particularly pertinent for cross collateralisation.
The third step is one of the most crucial – the acquisition of your investment property. The performance of the property you choose will have a significant impact on the timeframe you can purchase your next property, so choose wisely.
Choosing an investment property requires a huge amount of time and research, including detailed analysis of suburbs and the individual property. You need to identify areas that exhibit strong capital-growth drivers, such as economic activity, transforming demographics or infrastructure projects, and focus on these.
Once you’ve purchased your property, the forth step is to consider add-value opportunities that will help you increase its value. This can be done through renovation or development.
The fifth step is to effectively manage your property to achieve maximum returns. It’s wise to utilise the services of a professional property management business.
More often than not, the level of service you receive will be reflected in the price you pay. A good property manager will keep you up to date with market rent reviews and provide advice to optimise your assets.
The sixth step is to continually grow your knowledge of the property market. Stay informed by attending relevant seminars, reading industry-specific publications and stay in touch with like-minded property enthusiasts.
The seventh, and final, step is to regularly review your property portfolio. This will help to you stay focused on your property investment plan, keep your assets optimised and, ultimately, achieve your goals.
Once you’ve reached the final step you can start the 7-step process again to purchase successive investment properties until you’ve reached your long-term goals.