What does it take to build a successful multi-property investment portfolio? Any answer to this question cannot be straight forward otherwise we would all be millionaires. Most new property investors still learning how to invest in property tend to think that there’s a straight answer. They trawl the internet for one, only to find that none exists, and that it actually takes a lot of time and diligence to build a multi-property portfolio worth millions.
The dream of owning a large portfolio is realistic and in everyone’s reach. The sad truth is that only a few achieve it. Most investors own only one investment property in their lifetimes, and those that manage to rack up more do not achieve multi-million dollar worth. If you want to own many investment properties, one question you need to ask yourself is how to go about it.
Herein are the crucial keys that’ll guide you.
It starts with a good plan
To build a massive property portfolio, you start by creating a long-term plan that clearly states your financial and lifestyle goals. A plan helps you identify your goals and how you’ll go about achieving them. A great plan should include an assessment of your risk profile, your current lifestyle and professional situation, as well as your financial health. You should determine and include the types of properties that you want to own (villas, commercial, housing units, etc.), plus the estimated time frames and the steps to achieve each goal. With a plan in hand, you’re far ahead of investors that start without one.
To come up with a plan, seek help from fellow investors who’ve been around the block, attend industry seminars, and examine market trends and opportunities.
Organise your finances
Building a multi-property portfolio is capital intensive. It requires one to have their finances in order before embarking on it; otherwise the chances of running bankrupt are high. It’s also unfortunate that most financial institutions aren’t aware of the proper finance structure necessary for someone that’s trying to build a big portfolio. Your best choice is to find a property investment consultant to help you with this part.
Acquiring an Investment Property
This step is foundational to having a successful portfolio. The performance of the property you buy can make or break your chances of advancement. It’ll certainly affect the duration between your first and second property purchase. Some tips to buying the right property include:
- Choose the right suburb
- Buy below median price to improve your chances of capital growth
- Aim for capital growth and significant rental yield to take care of property-related expenses.
- Renovate or redevelop to increase the property’s value.
Expand your Portfolio
The plan for when to buy your second property should be crystal clear. Ideally, it should be after your first property starts performing well. If your finances are in order and you can handle more risk, going for another property should be a right move.
For starters, it’s advisable not to worry about the size of the portfolio you have but its worth. Concentrate on the performance of the properties. It’s better to have a few properties that are performing above average than ten that are below. The trick is getting the right properties in the right locations.
Diversify your Portfolio
Diversification parries the risk induced by uncertainty in market performance due to location and type of property. Your portfolio should be long-term, and focused, with different types of properties in various locations and regional areas. This will spread the risk systematically, such that poor performance in one area shouldn’t affect your portfolio adversely. It’ll also alleviate land tax burdens.
Manage your Portfolio
Owning and profiting from property requires effective management, as long as they’re under your custodianship. For that matter, having a professional property manager is advisable and will help you achieve maximum returns from your properties. It’s also apt to build a team of tradespeople that you can call on at short notice to fix issues that may arise on your properties. On the team you be sure to add an experienced, independent financial advisor and accountant, a mortgage broker, and buyer agents from different regions.
Be in the Loop
Stay ahead of the curve by continuing to grow your knowledge of the property market. Stay informed of what’s happening by attending relevant seminars and by reading industry publications. This way you’ll be made aware and thus will not react poorly to bad and good news.
Another way of staying in the loop is by aligning yourself with like-minded property enthusiasts for support and access.
Review your Property Portfolio
The purpose of reviewing your property portfolio regularly is to make sure that you stay in line with your property investment plan. And to keep your assets optimised for your financial goals. Don’t hesitate to sell off underperforming properties that have no prospects. Investment mistakes are common and it’s better to cut them off early before they can affect the entire portfolio.
As stated earlier, building a multi-million dollar portfolio takes time and diligence. If you can manage to focus on the long term, while sticking to a well-advised plan, you’re on your way to having one.