Growing your property portfolio

As the host of ‘Your Property Empire’ Fridays on Sky News Business Channel, I’ve been lucky enough to speak to some of Australia’s best property specialists and researchers and ask them questions about how to make money from property.

What do all these people identify as the key to their success? It is the importance of developing a strategy for investing in property. My personal strategy has been refined in the 20-odd years that I have been investing in property and I now have a simple, but robust approach that gets results, and can work just as well for somebody earning $50K as for somebody with a wealth of $500 million or more.

So if you’re looking to expand your property portfolio, here are 12 tips to guide you:

  1. Set your strategy before you buy – Work out the pros and cons of different strategies and focus on the numbers, as they often give you a clear-cut perspective rather than an emotional opinion.
  2. Build a professional team of experts – You can’t be an expert at everything so learn to outsource. Every dollar you spend will often give you $2 back in savings or better investment returns.
  3. Research – Pay for the latest research into your chosen market and look beyond your front door. Invest where you get the best financial return, no matter what it looks like.
  4. Choose your suburb carefully – It’s very hard to accurately predict the next hotspot that might double your money overnight. Buy blue-chip and invest in something that will give you more consistent grow over the long term.
  5. Know what properties to buy – Something smaller in a great location will attract better capital gains than something larger in an area with low demand.
  6. Don’t buy on price alone – Sometimes you need to pay a 5 or 10% premium for a good property in a good location. If it’s cheap, it’s often cheap because no one wants it.
  7. Use a professional valuer – This makes it virtually impossible to make an emotional purchase or get ripped off.
  8. Consider a buyers’ agent to help you buy – Professional buyers often get to buy a lot of properties before they hit the open market, which means you get access to better properties and less competition.
  9. Set your buffer – You need an emergency cash buffer for unforeseen expenses and to guard against potential rate rises (equity in your home or other properties is the perfect buffer).
  10. Refinance your property to create a buffer – When your property grows in value, refinance to create an emergency ‘buffer’ zone. This will ensure you can continue to make mortgage repayments, even if you lose your job. Don’t find yourself in a forced-sale position, as you won’t get the best price and it may trigger capital gains taxes and other expenses.
  11. Re-sign your tenants – Hire a professional property manager to ensure you get reliable tenants and that they pay a good market rent. Consider tying your existing tenant down to a new 12-month agreement. This will help guarantee your rental income.
  12. Think long term – Even if you buy the wrong property at the wrong price, the market will generally rise over time, so hold on and stick with it. It’s much better to make a poor decision than no decision at all!
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