How to build a property portfolio

Getting started in property investing is exciting, and may be easier than you think.

Property investment could be a great way to build your wealth and achieve your long-term financial goals.

Here are some tips to help you work towards building your property portfolio.

Set your goals

Not sure where to start? A simple tip is to work out your goals then work backwards.

What are you hoping to achieve in the long run?

Perhaps you want a passive income of $2,000 a week steadily flowing into your bank account or to be able to live off a yearly amount in retirement.

From there, you can determine how many properties you will need to own at what price point and rental income to achieve your goals.

Define your investment strategy

There are all sorts of strategies when it comes to property investment. It’s best to talk to your financial advisor or accountant about the right strategy for you, based on your financial circumstances and aspirations.

Rental yield vs capital growth

For some investors, rental yield is the primary goal.

There are two types of rental yield:

  • Gross rental yield is your annual rental income divided by the property value, multiplied by 100.
  • Net rental yield is your total rental income, less any expenses incurred in owning the property, expressed as a percentage of the purchase price.

For other investors, capital growth is more important.

It can be tricky to achieve both solid capital growth and a high rental yield, so often investors have one or the other in mind.

One investment strategy is to aim for a portfolio with certain properties that deliver high rental yields and some that offer strong capital returns.

Positive gearing vs negative gearing explained

Positive gearing is when the gross rental income is greater than the costs associated with owning a property. In other words, the property generates a positive cash flow.

Negative gearing is when the rental income is less than your outgoings. One of the drawcards of negative gearing is that you can offset losses against your salary, thereby reducing your total taxable income and tax payable.

Again, it’s recommended to speak to a professional about whether positive versus negative gearing is right for you.

Get your finances in order

Once you’ve defined your goals and investment strategy, speak to us about how to fund your property investment.

You may be able to use the equity in your home for the purchase. Equity is the difference between the current market value of your property and how much you owe the bank. If you’d like to explore how much equity you have to work with, you can talk to us.

We can also help you create a budget for all the costs you’re likely to incur as you build your property portfolio, such as council rates, management fees and insurances.

Start the property hunt

The final step is to start looking for the right investment property in the right location.

Your investment strategy and what you’re trying to achieve will ultimately impact what and where you buy.

Generally speaking, if capital growth is your motivator, consider to go for suburbs that appeal to a large demographic – ones that have plenty of amenities like schools, public transport and shopping precincts.

For inspiration about where to find properties with big rental returns, including the top 10 highest rental yield suburbs per state/territory, check out CoreLogic’s best performers for 2021.

Tip: For free suburb and property reports containing a wealth of information about everything from rental yields to comparative sales, get in touch.

A word about diversification

Diversification is the practice of spreading your investments around to mitigate risk of loss.

In terms of real estate, that might mean investing in different geographical markets, investment strategies and property types (residential and commercial, for example).

As you build out your property portfolio, it’s a good idea to keep this in mind.

Get in touch

With the right support, you too can enjoy the benefits of property investing. The sooner you start the better, so speak to us today.

Your full financial situation would need to be reviewed prior to acceptance of any offer or product.

The material on this website has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained on this website is General Advice and does not take into account any person's particular investment objectives, financial situation and particular needs. Before making an investment decision based on this advice you should consider, with or without the assistance of a securities adviser, whether it is appropriate to your particular investment needs, objectives and financial circumstances. In addition, the examples provided on this website are provided for illustrative purposes only. Although every effort has been made to verify the accuracy of the information contained on this website, Infocus, its officers, representatives, employees and agents disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information contained in this website or any loss or damage suffered by any person directly or indirectly through relying on this information.

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