Tips on building a successful property portfolio

How many investment properties should you buy?

It’s a question that a lot of investors ask me and unfortunately there’s no simple answer – it really depends on a number of factors.

The most important thing to figure out is what you actually want from your investments. For example, are you planning on building a large passive retirement income, or are you simply wanting to supplement your income?

The problem is, most investors stop at one or two properties which is just not enough if your goal is to build a decent retirement income.

Figures released by the ATO and property data group CoreLogic gives us a clearer picture of how we currently invest in real estate…

Just over 70% of investors own one property, while a further 18% own two. Then it drops down to 5.5% who own three, 2% who own four, 0.8% who own five and 0.9% who own six or more.

It could be argued that even six properties won’t be enough to fund your retirement if you want a nice lifestyle – and right now only 0.9% of investors are even close to that point!

What to do? Here are some tips to help you figure out how many investments you need in order to achieve your goals;

Develop an investment plan

The best idea is to work backwards. Say you want to fully fund your retirement with $100,000 in passive income then five properties returning $20,000 per year would work right?

Actually, no. You’ll need to pay tax on that income and even if you owned all five debt-free, they’re still going to cost some money to maintain. Do the numbers taking everything into account.

In our Smarter Finance & Wealth Creation eBook we show you the exact formula to use when working out how many properties you need to buy to achieve the level of net income you want in retirement. If you haven’t already you can download our guide here

Be realistic

A $1 million investment property returning a 5% yield will provide you with $50,000 in income. So just buy two of them and you’re all set for a great retirement!

…The problem is there aren’t many ordinary investors around who can afford a $1 million investment property – in addition to the high acquisition costs you often have to endure higher holding costs too. The more realistic scenario is to acquire multiple, more affordable properties – so you’ll definitely need a few of them in order to achieve your goals.

In our eBook we show you how to build a passive [after tax] income of $50,000 with only 4 average-priced investment properties! What’s more we can actually help you make it happen by providing free property investment coaching – for more details on our Real Investar Program click here

You must have capital growth to achieve income

When people talk about property income, they immediately think about rental yield. But if you’re aiming to be able to fund your retirement, it’s crucial that your properties achieve strong levels of capital growth.

There are two main reasons;

  • Capital growth will enable you to buy more properties. The faster your property grows in value the sooner you’ll have the equity you need to buy your next investment property, and so on.
  • When you’re ready to retire, odds are you will not have paid off the debt on a multi-property portfolio. In order to achieve your desired passive income you will need to sell half your portfolio to pay off the remaining properties – that way you can live off the rental income. So the faster your portfolio grows in value the sooner you can pay off your debts and generate the income you desire.

Safety in diversity

As with most investments, diversity provides safety. It’s always a good ideas to buy a mix of property types [size and style] in a range of good quality, high-growth areas.

Get started ASAP

Real estate is a long term investment strategy only. The longer you hold your investments, the more capital growth you will achieve.

You also need a fair bit of time if you’re aiming to build a large portfolio – putting together the money for each purchase might take a year or two on each acquisition, whether it’s funded from savings or equity.

If you need 10 properties to achieve your goal of $100,000 passive income; and you buy every two years, we’re talking 20 years minimum to get your portfolio together.

Get comfortable with good debt

You’ve heard of the term ‘good debt’? Remind yourself of this if you’re nervous about taking on high debt – which is inevitable on a large portfolio.

Property is a very safe, reliable way of accumulating wealth and you need debt to do it. Accept it, make smart choices when buying, and stick to a budget. Don’t push yourself too hard financially, make sure you have a buffer for rate rises and so on over the very long term.

Getting help

Finally, you need to build a team of trusted professionals before embarking on any investment strategy. There is a lot to consider, including tax matters, ownership structure and debt management to name only a few.

At Urbantech we’ve got you covered – we’ll help you get the best possible finance deal on your next property investment purchase plus we can put you in touch with our circle of trusted advisors including Financial Advisors, Accountants, Real Estate Agents and Conveyancers.

But there’s one more thing…

And it’s probably the single most important factor in determining how successful [and how quickly] you’ll be in achieving your investment goals – it’s the actual performance of your investment properties!

Put simply, you need to buy the right property in the right area! And by that I mean good quality high-yielding property in areas that have strong capital growth, year after year.

The fact is some properties are much better investments than others. For example, which would you rather have; a property with a 3% yield in an area that has averaged 4% capital growth over 10 years, or a property yielding 6% in a suburb that has experienced 8% capital growth year in year out?

I’m not trying to insult anyone’s intelligence here, but it’s surprising how little time and effort people put into trying to find the better performing property. And I’d say this is probably one of the main reasons most investors never get past one or two properties.

It’s just plain logic – a good investment will increase your wealth faster than and poor-average investment!

Therefore your goal should not be to buy the nicest looking property or the one that’s close to where you live – it should be to buy the best performing investment property you can find.

Unfortunately most people are just too busy or don’t have access to the necessary research, data and tools to sort through all of the potential property investments for sale.

If this sounds like you then you might be interested in our property investment coaching program – the goal of this personalised program is to help you build a ‘market-beating’ high growth property portfolio which provides you with the level of passive income you desire.

>> For all details and to apply for our free coaching program click here

PS. Thanks to those of you that have already put up your hands for our coaching program, we’ve got some exciting things in store for you over the coming weeks.

If you need any other details please feel free to contact us any time.

Sam & Matt
Urbantech Group
Adelaide Mortgage Broker +plus more…

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Urbantech provides a complete service to build and protect your wealth; mortgage & finance broking, +plus a range of allied services. Simply put we'll make sure you get the best deal going. To get started today book in your FREE Finance & Wealth Evaluation or call us on 08 8451 1500

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