5 Foundations For Building A Property Portfolio

Shakira
Post : January 4, 2023

Building a property portfolio is the key to success in property finance. It's a great way to showcase your abilities to potential clients and demonstrate that you have the skills and experience they need. It's also a proper way to get noticed in the real estate industry. Many financial advisors commented on this particular topic.

 But the information is not entirely clear for people new to this field. We have come up with 5 basic foundations for building a property portfolio. So you can create your own real estate portfolio without any hassles.

What is Property Portfolio? 

It is a collection of different properties that you have purchased or managed. It can be as simple as a single building in the suburbs or a bunch of buildings. A real estate investor must have a property portfolio for your buildings or properties. Additionally, residential and commercial properties can also be included in it. 

A property portfolio is an important tool for building a financially stable future and starting a career in real estate businesses. People say it is good to start building your portfolio when you are young as you have so much free time. However, it's a misconception. If you have the dedication, you can always create a property portfolio at any age. 

Before diving into the 5 foundations for building a property portfolio, here are some key points to keep in mind. Always have a diversified property in the portfolio. This means that you should have various properties in different regions and areas. 

So that if one of the properties had some issue, it does not have as much of an impact on your portfolio. You should also invest in a real estate agent to help you with the process. This can help you find properties in demand and ensure that your portfolio is well-managed.

Have a Chat With a Mortgage Broker

This is one of the first things you must do to build a successful property portfolio. Finding a skilled as well as a good mortgage broker can be difficult due to their bad reputation in the industry. However, the numbers must be done properly by professionals. 

They can advise on how often you can keep repeating and how many properties you can buy. This is imperative as they help you allocate your budgets to your desired goals. A mortgage broker will assess your finances and help you plan out property investment goals. 

This step is important as they determine the best finance option that fits your needs and the economy. Then you should find out the amount of equity you should have in your first property before using it to buy another property. 

This is one of the areas in which mortgage brokers specialise. Generally, first homeowners will have 95% or 100%. Subsequently, buying the 2nd property will be 80% or 90%. Finally, most investors need at least 80% in there after that. 

Once you have found the property that you want to purchase, the mortgage broker will help you out and advise you to apply for the loan and manage the process.

Review Your Financial Requirements

Many consider whether they should skew their property portfolio toward capital growth or rental returns. The answer to this is quite simple. It is pretty much depended upon the person. High-income individuals tend to go more for capital growth because it is not necessary to pay taxes on the growth.

And also, low-income people will generally go for positive cashflow-type properties. This positive cashflow property investments usually have the potential to create sufficient rental returns to cover the mortgage while leaving some money for yourself.

If it is a capital growth investment you are aiming for, you should add properties to your portfolio that create higher-than-average value increases over the years. Real estate investments and acquiring wealth from them are a gradual process that needs patience.

Finding the Right Investment Location

This is one of the most vital aspects of building a property portfolio. It is recommended that at least 5-15 Km from the city is ideal. And also, properties that are much closer to CBD are quite expensive. It is far more fit for capital growth strategies. However, if it is a rental you are looking for, buying rural and outskirts areas would be much better.

In order to determine the right property, you should talk with the local real estate agents. This helps you to understand the values or ups and downs of the local property market. Especially they will tell you what the local renters are looking for in a property.

Learn Your Alternatives

There are many other alternatives for real estate investments. Such as becoming a partner with Stayz or Airbnb. These business models go above and beyond the traditional real estate model. These companies can provide you with high rental returns compared to long-term renting. But there are some risks involved if you were to follow this path. 

You will be paying more money to these companies. Also, the general frequency of tenants renting the place can vary. Depending on the location, season, time of the year, etc. So it is evident that some uncertainty is involved in the modern real estate business models. That is why the demand for traditional real estate models is still high.

Don't Overthink Your Decisions 

Someone new to the industry can easily fall into this cycle of overanalysing every detail and not getting anything done. If you focus too much on the information, you won't be able to move on with the investments. Becoming a perfectionist in this topic is the last thing you need to do. It is ok not to know every single bit of information. 

Most of the senior and experienced professionals in this industry do not even know everything, regardless of their decades of experience in the business. This is a slow and patient journey. Therefore, it is wise not to be emotional about your decisions. 

Just put yourself out there and start buying. Otherwise, you will not be able to build a property portfolio. When we say just put yourself out there, we don't mean without "any" understanding. You should do your homework but don't overdo it. 

Conclusion

The real estate industry is so much different compared to every other field. When the market changes drastically, it can negatively or positively impact your business. 

A property portfolio can ensure a good track record in your real estate business. And also, there is no such thing as coming to the industry with all the knowledge in the world, and it is a go-as-you-learn process. 

Start your property portfolio now and create a personal resume for your real estate business. But what if you are more interested in acquiring your own home before starting a property portfolio? Well, that's when Afiyah Financial Services will become your go-to financial service provider. 

 

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