Unlocking Your Investment Potential: 5 Expert Tips for Adding an Investment Property to Your Portfolio

Unlocking Your Investment Potential: 5 Expert Tips for Adding an Investment Property to Your Portfolio

Adding another investment property can be a good way to diversify your portfolio and improve the potential of getting a greater return on investment (ROI). Also, cash flow can improve through more rental income and you can claim specific tax deductions. The benefits of unlocking your investment potential are attractive but purchasing another investment property has to be well-thought-of and well-researched. 

If you don’t assess your current situation and don’t do your research, you could be biting off more than you can chew. There are a couple of things to consider, and that’s what we’re going to focus on today. This article is for you if you’re wondering whether adding another investment property is something that’s going to be beneficial and if you’re ready for it.

Are you ready to unlock your investment potential and add another investment property?

How would you know that you’re ready for another investment property? In most cases, you might have heard your friend or colleague say that the market is ripe, so it would be smart to get another investment property now. Even if you have the financial capacity to make a down payment on another property, just hearing that the market is good won’t cut it.

You’ll know that you’re ready to invest when:

  • Your first investment is already established: You shouldn’t be looking to buy another investment property when you’re still building up the one that you already have. Remember that buying a new property is going to be additional work that you should be able to handle.
  • You have enough equity on your first property: The equity of your home is basically your home’s current value minus its liens. The greater your property equity, the better.
  • You have more income and considerable savings: Investment properties cost money to own and maintain. If you don’t have enough income and savings, you may not have enough to cover both expected and unexpected costs.
  • You’re close to retiring: When you’re reaching retirement, it’s good to have other sources of funds, like investments. You could be looking at a pension of $1064.00 (single) to $1604.00 (couple combined) per fortnight which could be enough but it’s always a smart move to make investments to increase your cash flow.
  • You can get good rates on a mortgage: A good mortgage broker will be able to help you find the right mortgage with the right rates for your needs.

Definitely, each situation is unique. The scenarios we’ve listed above are just some of the prerequisites that you can think about before you decide to purchase another investment property. You can also ask yourself the following questions:

  • Do I have enough experience to handle one more property?
  • Is now truly a good time to buy?
  • How is my first property performing?
  • Is purchasing a second investment property aligned with my financial goals?
  • Do I have enough income and savings?

The answer to these questions could lead you to make the right decision. Self-assessment, assessment of your finances, and doing your own research will help you have a better picture of your capacity to potentially own and manage another investment property.  

Tips to Consider Before Adding an Investment Property to Your Portfolio

While the thought of purchasing another investment property can be exciting, it can also be scary at the same. The fact that you’re considering adding another investment is a cause for celebration, but on the other hand, if you make a bad investment decision, it could affect the success that you have already achieved thus far. Here are some tips that can guide you towards making the right choice and unlocking your investment potential: 

Define Your Investment Goals

Investment-wise, ask yourself first what you want to achieve and what timeline you’re going to follow to achieve your goals. For example, your goal could be investing in another property so you can reach $6000/month in rental income in the next five years.

How Will You Diversify?

Adding another investment property can diversify your portfolio, help minimize risks, maximise returns and provide more stability and flexibility. The question you need to answer is “How?”. Diversifying your property investment portfolio can be done by choosing either a different kind of property or considering a different location.

  • Different kinds of property: Consider investing in another type of property. For example, if you currently own an apartment, it might be a good idea to look into a duplex. Choosing a different type of property can help in diversifying your investment portfolio by adding a new asset class, reducing your exposure to risks specific to one type of property and taking advantage of the strengths of the different types of properties. 
  • Different location: Location is a crucial factor to consider in property investment. An adviser will be able to tell you which areas have a high demand for rental properties, good infrastructure and potential for future growth. 

Determine Your Budget

Make sure you are aware of how much you are able to spend on this additional investment property. You should also consider any potential expenses associated with the additional investment property such as mortgage payments, property taxes, insurance, maintenance costs and property management fees.

Look at Your Loans 

Review your loans to see if your current loans are set up properly to enable that new property to be added. This will help you understand your financial situation and ensure that you are able to obtain the necessary financing for the new investment property.

Get Professional Opinion 

The final tip is to get professional advice. Investing in real estate can be complex, and involves a significant amount of capital. Professional advice can help you make informed decisions when adding to your investment property portfolio, avoid costly mistakes, and maximise your investment potential.

If you’d like to ask for advice regarding investment properties, Vision can help:

  • Provide valuable insight into the local market. 
  • Help identify investment opportunities (what property types are most suitable for your portfolio and determine what areas have the highest likelihood of experiencing growth).
  • Identify risks. 
  • Reduce the likelihood of financial losses. 
  • Determine the best investment strategy for you.

Vision also has a Property Investor Program that aims to educate investors like yourself on the ins and outs of property investment. It includes assessing your investment capacity and your personal risk tolerance, which will help you select the right kind of investment property to suit your budget and personality.

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