4 Investment Strategies to Grow your Property Portfolio
Property has always been a popular with investors. In finds that sweet spot between low-risk, low-yield fixed interest, and high-risk, high-yield of shares. It is the perfect for investors looking for a relatively safe investment that offer decent returns, especially over the long term.
Here are four investment strategies to help you grow a strong property portfolio:
1. Set Clear Goals
Setting clear investment goals is important for any investment, but especially when it comes to property. Why do you want to invest in property and not in, say, stock market shares? Are you looking for capital growth or do you want to make money from renting out your property, or do you want to use the property to reduce your tax liability? The answers to these questions will determine the type of property you invest in, what term you are going to hold the property, and the amount of capital you put into the property.
2. Adapt And Diversify
The property market is ever changing. The rise of short-term letting platforms like Airbnb has had a large impact on rental properties, especially in cities like Sydney and Melbourne, and holiday towns like Byron Bay, driving up property prices. At the same time, the ongoing housing market slump has been bad news for real estate investors trying to sell. However, examples like these can change, as platforms like Airbnb are facing regulation, and the housing market will eventually recover. Because of these variables, it is important to distribute your investment across a broad range of property types and locations, in order to ensure you are protected, and that you maximise your investment growth.
3. Leverage Equity
Cash flow, or lack thereof, can be a big barrier to growing your property portfolio. However, if you already own property, you can leverage the value to free up some cash and use it to kick-start further investments. Equity is the difference between the market value of your property and how much you still owe on the loan. This frees up some funds and allows you to pay a deposit on another property without having to save for it first, enabling you to grow your portfolio quicker. However, be careful of stretching yourself too thin, as it will put you in a difficult spot should the value of your property drop, as seen with the above-mentioned housing market slump.
4. High Value Not High Number
When you’re looking for strong capital growth, quality is better in the long run than quantity. It is better to have fewer high-value properties, than many low-value properties. A higher value property has higher potential rental income, as well as a better chance of selling the property for a profit. Choosing an up-and-coming location aside, many investors use renovation to increase the value of their property, but only to a point. You should think carefully whether renovations or improvements, like adding a swimming pool, will actually increase the value of your property.
Contrary to popular belief, owning property is not a passive investment. For your property portfolio to really grow, you need to pay attention to the market. Learn as much as you can about the property market to help you to spot trends, determine whether your property is still in line with your investment goals, then act accordingly.
For more information about how you can make the most of your property investment portfolio, speak with one of our mortgage brokers or financial strategists on 1300 508 820.