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If you’re thinking of getting into property investment or would like to expand your portfolio, now is the time. We look at 7 common problems preventing people from doing just that.
According to the ATO, over two million Australians own investment properties. However, the majority of those own just one, with 20 per cent having two properties and just 7.2 per cent owning three properties.
These statistics indicate that investors may be limiting their wealth growing potential. Here we identify common mistakes that prevent investors from developing a healthy property portfolio. These are the critical questions to ask yourself.
Plenty of Australians stick with one bank for everything from savings accounts to mortgages from day one of opening them. However, this loyalty often means missing out on competitive loans that could help charge your property portfolio towards more than one or two properties. Don’t fall into the trap of cross collateralisation (using one asset as collateral to secure multiple loans with one lender) which makes it difficult to refinance with another offering better policies.
A positive cash flow property is one where the income, generally from rent, is more than the total expenses. This is important on the path to owning multiple investment properties to ensure enough income to service the debts, taking fluctuating interest rates into account.
All investors need predictable cash flow for secure investments. As a general rule, it’s best to invest in newer properties to avoid high maintenance costs. This also makes it easier to beat the competition when it comes to high occupancy rates and reliable tenants.
The key to successful investing is to invest in assets that increase in value well into the future. While the median house price has increased above inflation, land prices are almost double that value. It’s location, location, location plus land that trumps units when it comes to value.
As a general rule, it’s best to invest in newer properties to avoid high maintenance costs.
Valuers often consider sales from the last three to six months to estimate value of your properties, so you can add to your portfolio. Therefore, make sure you’ve got an up-to-date copy of your bank’s valuation and any sales data from similar properties, to help with the most accurate valuation.
Markets grow at different times, so it makes sense to own property across various regions or cities. We have talked about interstate investing at length before. For example, three properties in three different capital cities would attract growth from each within a 10-year cycle, rather than relying on the cycle of one city.
The secret to a successful property portfolio is to start with the right advice from the beginning. Buying properties with land, in growth areas leads to equity that builds your financial freedom with more investments over time.
The secret to a successful property portfolio is to start with the right advice from the beginning.
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