How to build a property portfolio

by | Mar 1, 2023 | Property Investing

 

Building a property portfolio can be a great way to diversify investments, generate passive income and build wealth over time. However, knowing where to begin can be the biggest hurdle. Whether you’re new to property, or a prospective investor, we’ve outlined 5 ways to help build a property portfolio.

 

1. Outline your goals

When it comes to building a property portfolio, a key first step is to clearly define your investment goals. Knowing what your end property portfolio goal is will help to make informed decisions about the types of properties to invest in and the costs involved. Discussing your objectives with a property professional will provide valuable advice tailored to your goals. A professional property advisor can evaluate risk tolerance and work on the best approach to attain your established objectives while safeguarding your assets and wealth. 

 

2. Use existing property equity

Seasoned investors have a wealth of experience in how to build a property portfolio. One technique often employed is leveraging equity to purchase additional properties. Home equity refers to the difference between the current market value of a property and the outstanding loan amount. By leveraging existing equity, investors can enter the market with minimal upfront costs. This can be a way to quickly build a property portfolio

If you’re a first-time owner, leveraging property equity is also a viable option for building a property portfolio. Existing property equity can help secure financing without needing a cash deposit. Consulting with a financial advisor can help navigate the process. 

 

3. Capital growth opportunities

Properties located in areas with high capital growth potential are likely to appreciate over time, which can result in increased profits when selling. When building a property portfolio, look for properties with strong economic growth, low unemployment rates and high demand for housing. Houses in areas that have great transportation and schools, as well as infrastructure projects, could drive up the value of a property in the long term. 

 

4. Rentvesting

Entering the property market has been challenging for young prospective investors, especially if there are limited budgets available. That’s why ‘rentvesting’ is becoming an increasingly popular strategy for renters to enter the property market and start building a property portfolio

But what is ‘rentvesting’? Rentvesting is the notion of owning an investment property, while simultaneously renting somewhere that suits your lifestyle. This way, you can still live where you want to live, while building wealth through property ownership. 

Not only does rentvesting give you the flexibility to live in your desired circumstances, but it also provides a range of benefits for building a property portfolio, such as potential tax advantages, capital growth, and passive income from rental returns. 

 

5. Utilise negative gearing

Negative gearing is a tax strategy allowing property investors to offset the costs of owning and maintaining a rental property against their taxable income. This means that the losses incurred from owning an income-producing property, such as interest payments on a mortgage, property management fees, and maintenance costs, can be claimed as a deduction against the investor’s income. 

 

One of the key benefits of negative gearing is the cash flow advantage by claiming tax depreciation on the natural wear and tear of a property and its assets. By doing this, investors can further reduce their taxable income. The difference can result in more cash to reinvest in additional properties to start building out a property portfolio

Building a property portfolio can result in huge financial benefits with the right approach and direction. However, it’s important to remember that property investment involves risk, so it’s essential to seek advice from your preferred financial advisor before making any decisions. 

If you have a client ready to build or expand their property portfolio, reach out to our team with your clients requirements and we’ll send you a property pack to match the criteria! www.alcprojects.com.au/contact 

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