Investing in property is one of the most popular ways people secure their financial future. Sometimes, however, it can be difficult for property investors to move from having one property they are investing in, into developing a multiple property portfolio.
Corelogic statistics show that roughly 20% of property investors have two properties, with 9% of investors owning 3 or more properties. With that being the case, are Australian property investors getting as much out of their investment strategies as they possibly can? Can property investors achieve more by having multiple properties in their portfolios?
What holds investors back from larger property portfolios?
Matt Ivers, property investment advisor with Vision Property & Finance, has dealt with this conundrum many times before. He suggests that one of the factors involved with property investors being unable to advance involves timing.
“I suspect what is happening is due in part to the property cycle. People look at investing in property often for a number of years before deciding to take action and buy that first property. Because they have taken so long to decide, they will often then have an unhappy experience where they have to hold the property for much longer than they intended because they have missed the run-up to the peak of the property cycle. By the time they have purchased the property cycle is turning from peak to a post-peak flattening where prices growth is suppressed until the next run-up occurs.“
When property investors mistime the purchase of their investment property and buy out of cycle they will need to hold the property investment for much longer before it starts to give them a good return.
“First-time property investors especially will often feel burnt and frazzled by this first purchase mistiming. When the market finally swings around and is due for another run-up these first-time properly investors are so disenchanted with their initial experience that they will not even bother investing in property again. This is a mistake, and they could easily fix the original problem by making sure they receive excellent advice before proceeding with their next property purchase.”
Compounding this problem is that the property investor, especially the first time they become involved in property investing, will not seek professional advice and instead try to do things their own way.
“I sometimes do see clients that have done considerable research before they invest in property. However, that is in the minority, and because the ordinary investor doesn’t have the tools professionals have access to they will not be able to detect the signals that determine whether a purchase is a good fit for their situation.”
3 Steps to a Better Multiple Property Portfolio Strategy
Matt says people can place themselves in a better position to achieve a multiple-property portfolio sooner by following three simple steps from the very beginning of their property investing journey:
- Get some good advice. This can save you from making a bad decision which could cost you in more ways than one. So, reach out to someone who knows a lot more and is further down the road than you. Whether that’s a friend who has a lot of property investments or is a professional advisor your first step should be to get good advice.
- Plan it out. Sit down with your advisor and plan where you want to be in 20 years, and where you need to be when you retire. This allows you to set some goals which direct your actions; they’ll guide you in making decisions about what property to purchase. Goals can always change but if you at least have them they really help you get to a place where you can have a bigger portfolio.”
- Start as early as you possibly can. “I had a client who impressed upon her children the importance of investing. Now that her children are in their mid-twenties they each have multiple properties to their name. When you add your second property things grow in multiples. When rent increases occur, for example, it is usually across two properties rather than one. This helps when you’re trying to finance further properties to add to your portfolio.” – Matt Ivers.
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