SO, WHAT IS A PROPERTY PORTFOLIO?
Well, it’s simply just two or more property investments owned by an individual, a group or a company. For most people thinking about diversifying their investment to build a property portfolio it normally just involves using the equity in their current home as a deposit to purchase a second property.
WHAT EXACTLY IS HOME EQUITY?
It is the value of ownership built up in your home or property that represents the current market value of the house less any remaining mortgage payments. This value is built up over time as you pay off the mortgage and the market value of the property appreciates. So, over time the built-up equity that you may have in your home will be enough to leverage for the deposit on your second property.
OKAY, SO NOW WHAT?
1. SPEAK TO AN ACCREDITED FINANCE BROKER
A Finance Broker will help you find out exactly what your home is worth and how much equity is available. They will then determine if this will be enough to use for a deposit to buy your second property. Specialist Mortgage, the finance team at aussieproperty.com, will ask you to complete a 5 minute survey in order to structure your home loan to make things simpler down the track when adding more properties to your current portfolio. It’s very important to be honest and to complete the survey to the best of your ability.
Try to select a Finance Broker that acts independently of lending institutions and can provide a full lender analysis to ensure you receive unbiased advice. Mortgage reviews should also be free of charge, as Finance Brokers are paid by the banks upon securing finance for their clients.
2. IDENTIFY YOUR INVESTMENT STRATEGY
When purchasing an investment property, you must ask yourself the question are you purchasing for capital growth or rental yields? It’s very important you sit down and speak with a property investment consultant that can educate you on the difference and to plan this strategy with you carefully. The aussieproperty.com team is highly educated on hot spots and pockets of value in many locations of Australia.
Some property investors prefer a lower-risk strategy, called Positive Gearing, where rent covers the costs from day one. The risks are lower. The property is cash-flow positive and self-funding and success of the strategy does not rely on big capital gains down the track.
A big attraction of Negative Gearing to a lot of investors is that they are able to offset the losses on the property against their other income, usually salaries, and reduce the amount of income tax they pay. The tax savings do reduce the losses on the investment that still have to be funded from other income, but it remains a loss-making investment.
Many higher-income earners are attracted by the tax deductions because they have the biggest tax savings. However, tax considerations too often override the fundamentals in people’s investment decisions, which can be fatal if you don’t get the right advice. Our tax team, ATS, are market leaders and will analyse your personal situation and offer you expert property advice to optimise your financial opportunities, whether you’re an Australian based investor, Australian expatriate or foreign investor.
3. SELECT YOUR PROPERTY
Once you’ve met with a finance broker and worked a sensible investment strategy, our property experts at aussieproperty.com can begin looking at properties on the market for you to purchase. You can start by contacting one of our Australian Consultants and/ or by searching for properties through our aussieproperty.com website. We recommend you try our useful calculators which can help work out how much you may be able to borrow and what your repayments will be.
Our team at aussieproperty.com will make sure you budget for all the costs that come with owning an investment property, such as council rates, water rates, strata management fees, stamp duty, forecast capital growth, tax calculations and more.
4. REMEMBER, THIS IS A LONG TERM PLAN
You must be committed to these purchases and realise building a property portfolio takes a considerable amount of time. In order to see the biggest benefit from capital growth, you should hold on to your property for a minimum of 7 years to 10 years. The longer you hold onto your property portfolio, the more likely you’ll be able to ride out any downturns in the market cycle.
Remember that nothing is guaranteed and there is always risk with any investment in property, but our team at aussieproperty.com are here to help guide you every step of the way.