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How to build a property portfolio from zero

Published on 12th April by Alex Goldhagen

How to build a property portfolio from zero

Building a property portfolio is a great way to secure your financial future; however, if you thought that you can build a portfolio overnight then you need to seriously think again. Building a solid property portfolio takes a lot of hard work, planning and frequent review to ensure you are on target to meet your goals; however, it can be done with the right mindset and expert guidance.

So, why do the majority of Australians never get past their first property? In Australia, just 7.9% of Australians or approximately 1.7 million people own an investment property with the majority owning just one. The majority of investors don’t get past their first property with only 0.9% of investors owning six or more investment properties. (Source: RP Data & ABS Census 2011).


How many investment properties do Australians own?
No. of Properties % Australians who own investment properties % of investors who own investment properties
1 5.75% 72.8%
2 1.42% 18%
3 0.43% 5.5%
4 0.16% 2%
5 0.065% 0.8%
6 0.068% 0.9%

What stops investors owning more than one investment property?

There are many factors that are stopping investors from owning more than one investment property. These include the following:
  • Wrong property purchase – Many investors can’t get past investment property one, simply because their first investment property was the wrong one. The property has not grown in value or might have experienced stagnant or backwards growth instead, meaning the purchaser cannot tap into the equity for property number two. This is often for properties in areas such as mining towns, which have since been abandoned.
  • Bad experience – Another reason why so many people don’t get past property one is down to a bad experience. The investor might have bought a property that has been problematic and they simply don’t want to face the same experience again.
  • Unable to get a loan – There might be finance issues stopping investors from reaching property two. Their properties might not have grown by as much as they thought and their lenders refuse to lend them anymore. It’s therefore important that you purchase property that has strong capital growth with good rental returns, to allow you to keep on frequently investing in property as soon as possible.
  • Fear – Many people don’t get past property one (or invest at all) because their fears are stopping them. The fear of taking on too much debt, the fear that something will go wrong, that they will lose money, or even the fear of having bad tenants who damage your property. These fears can stop us from taking action and we tend to focus on all the negatives, rather than mitigating these risks which can help reduce these fears from actually occurring in the first place.
  • Lack of planning – Many investors simply don’t have the desire to go beyond property one, or have not built up a plan of how to reach their goals to help them secure their financial freedom.

So, if you don’t want to end up being one of the majority of investors who only own one investment property, here is how you can build a property portfolio from zero and get past investment property one.

7 Steps to build a property portfolio from zero


1. Save up a 10 per cent deposit
If you haven’t already done so, then the first thing you need to do is look at your savings and find out how much you already have. In order to buy a property, you require a 10% deposit, so on a $500,000 property this will require $50,000. If you have any outstanding debts like car loans then before you start saving, it’s best to clear these bad debts first. Lenders will also look more favourable upon you when it comes to getting a loan. Saving takes time, so you need to cut out those expensive holidays and really concentrate on saving as much as possible.

Saving up a deposit can be difficult, but if you have a partner then you might want to purchase an investment property together to halve the costs, or perhaps your parents can help? If you’re still struggling, then you might want to extend your timeframe to save a deposit by, or reduce your budget amount to something more realistic. You can also look interstate where properties might be a lot more affordable in comparison to the state you live in.

2. Have a solid plan and strategy and know your goals
Whilst you’re saving up a deposit, it’s also a great time to determine what your goals are and create a solid plan and strategy. Ask yourself key questions such as why you want to invest in property, what you want to achieve and when you want to achieve this by. You might want to invest in property to achieve financial freedom and to lead a comfortable retirement or even to take an earlier retirement or work part time.

3. Buy your first investment property right first time round
The most important thing that you need to do is to ensure your first investment property is a good quality property, situated in a high growth area which will help you get to property two and three sooner. Ideally you should be buying property off the plan as this gives you a longer settlement time for your property to grow in value without you having to pay a mortgage. Depending on the stage you bought and the development size, settlement can be approximately two years away. By this time, if your property has benefited from high capital growth, you will have enough equity in your property to use as a deposit to purchase property number two.

By purchasing in a low growth area, your property would not have grown in value, meaning you might have to wait another 10 years before you can access enough equity to use as a deposit towards property number two. And, depending on your age, you might not have 10 years.

4. Surround yourself with the best possible team
In order to help you make the best property decisions, you need to surround yourself with the best team. This consists of a Property Consultant, Mortgage Broker, Solicitor, Accountant, Property Manager and a Quantity Surveyor. Each team member is integral to the outcome of your property, so it’s worth ensuring that you are working with a reputable and trustworthy team that can help you make the best decisions to help meet your goals. By scrimping on one member such as a solicitor, this could end up costing you dearly in the future if something went wrong and your solicitor wasn’t experienced enough or cared enough to assist you properly.

5. Keep the momentum going
It’s important once you have purchased your second investment property that you keep the momentum going. Each property should be bought in a high growth area which can benefit from strong capital growth and rental returns. You should buy property close to core amenities such as public transport, schools, retail and dining to make your property as attractive as possible. You should also keep an eye on the market and look at areas which are about to surge as possible areas where you can purchase next.

6. Continue to reassess your goals
As you start to build up your property portfolio, it is crucial that you continue to reassess your goals to ensure you are on target. Circumstances can change such as getting married, starting a family or even being made redundant, and this can all have an impact on your ability to build your property portfolio. However, if you keep these factors in mind and have a rough idea of what might be happening in your life over the next 10 years, then you might be able to plan your property investment purchases around this.

7. Sell to buy again
Once you have a number of properties under your belt, you might have reached your maximum serviceability with your lender, so you will need to sell a property in order to clear some of the debt to buy again. Remember, that investment properties are considered as good debt, but make sure that you do not overstretch your finances as this can put you under financial pressure. After owning a few properties, you might feel more comfortable selling off a property so that you own at least one property in full.

Key points to remember

Building a property portfolio from zero will be a long, hard road, but it is achievable if you do your research, listen to the right advice and take action. To help you get started, here are 10 key points to remember:

1. Start as early as possible
The best thing you can do is to start as early as possible. The earlier you start investing in property, the more time you will have in the market and the more time you have for your investments to grow. If possible, you should be investing in property in your 20s and 30s; however, anyone in their 40s can still invest in property and build a property, they will just have less time to achieve this in.

2. Speak to a Mortgage Broker to determine your borrowing capacity
We recommend that you speak to a Mortgage Broker to determine your borrowing capacity. Understanding how much you can borrow will help you narrow down your property options and purchase a property that sits comfortably within your maximum budget, to reduce your financial risk, if interest rates were to rise for example.

3. Get your first property right
Ensuring that the first property you buy is right first time round will set you up nicely to purchase property two. Look for a property in a high growth suburb, that is close to key amenities, within a low supply, high demand market.

4. Diversify and spread your risk
Once you have bought an investment property, it is important that you diversify to spread your risk. This could mean buying property in different states, different sized properties or different property types such as a town house and apartment.

5. Stick to your goals and create a detailed written investment plan
You need to stick to your goals and have a written investment plan in place to ensure you know what it is you want to achieve and by when. It is a good idea to review your goals frequently to make sure you are on top of everything. You should also consider what you will do if things go bad and have a plan in place to mitigate your risks.

6. Use a good team around you who you can trust and rely upon
Make sure you work with a trustworthy and reputable team who you can rely on. You will likely go back to each team member time and time again with each property you buy.

7. Keep up to date with the latest research and property news
As you own property it’s a good idea to keep up to date with the latest property news and research to ensure you don’t miss anything important which could affect your investment property. You can also review the suburbs that you have bought in and see how they are performing. Don’t forget to read the latest news on the iBuyNew website.

8. Think of the long term
Remember that property should be treated as a long-term investment and not just a quick way to make some money. Ideally, you should be holding onto the property for at least 10 years as this will allow your property to go through a full property cycle and will typically see your property double in value in this timeframe.

9. Sell to help reduce debt and buy again
Don’t be afraid to sell a property in order to reduce some of your debt. You might reach your maximum borrowing capacity when you own a number of properties, so it is important that you sell one property to pay down some of this debt on the others, allowing you to purchase your next property. However, make sure you don’t overstretch your finances to put you at financial risk.

10. Speak to a Property Consultant at iBuyNew
To help you build a property portfolio, it’s best to speak to one of our expert Property Consultants at iBuyNew. Our Property Consultants all have years of experience in the property market and have invested in property themselves so they can assist you with the buying process as well as suggest strategies that best suit your plans to achieve your goals.

Get in touch

To get your property portfolio started and get past investment property one, get in touch with iBuyNew today to learn how you can easily do this. Call us now on 1300 123 463 to learn how you can be within the top 1% of investors who own six or more investment properties.

Alex Goldhagen

Alex has previously worked as a Mortgage Broker and Financial Planner and enjoys helping his clients with their purchase of off the plan property in Sydney, Melbourne and Brisbane. For more information, contact Alex by email, alex@ibuynew.com.au, or call 1300 123 463.

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