Don’t just dream about that property portfolio, follow buyers agent Julie Crockett’s 5 tips for building income that will see you through retirement.
Most people only dream of owning a successful cash-producing property portfolio that will see them through into retirement, but few take the right steps towards success. For those of you who really want to achieve this goal, here are five tips to build a rock solid property portfolio to get you there.
1. Start with the end game in mind
If you want an income stream of $100,000 per annum in retirement, you need to focus on purchasing high yielding property that will give your portfolio strong capital growth. This entails looking for properties within a 15 kilometre radius of an Australian capital city, with high yields above 6% and capital growth of around 20% in the first year. These properties also need to be purchased at lower price points, which isn’t always easy and you won’t find them listed online. Work with a buyers agent who successfully understands how these properties can be accessed, leveraging strategic purchasing avenues to add them to your portfolio.
2. It won't happen overnight but it will happen
Give yourself time to grow your cash flow and equity while building your portfolio. Remember how long it took to save that deposit for your first home? Remember how disciplined you needed to be? The reality is that building a rock solid property portfolio takes strategy, time and discipline - and you must keep a close eye on its growth. Assess its performance at least once a month to make sure it's doing what you want it to do. Look carefully at your rental statements and see what expenses have been coming out: what are you being charged versus the kind of service you are you getting? If you feel your property manager is underperforming, look elsewhere.
3. Pour your love and attention on something that's going to build you wealth
For years I had a saying that my day job funded my passion - and if your end goal is to create wealth, your current income is key to helping you achieve that wealth. Tax time is often a prompt to get things rolling when you’re fully aware of how things are tracking financially and a reminder to make your money count. If your tax return reveals that your income is lacking, consider your options to increase it and place yourself in a better position to service a loan. Negotiate with your bank for a lower rate at the time of purchase - the higher value portfolio you have, the better your chances (I've been successful personally at cutting my rates by doing this).
4. Diversify to minimise risk
Diversification of your property portfolio means buying in different states of Australia and sourcing property types according to local demographics. When your goal is to build a rock solid property portfolio, purchasing within a 15-kilometre radius of our capital cities is a key part of your risk minimisation strategy. You're looking at areas of greater population, which means strong demand on housing supply - Melbourne and Sydney are prime examples of how this demographic demand has pushed property growth. Another consideration is to seek out dual income properties, as they will provide a very good yield of above 6% and help to achieve your end game faster.
5. When you think you know it all, think again
You will make mistakes along the way, but working with a professional will assist in minimising any problems. Start as early as you can - your 20s if possible, for those strategic with their income from the outset - and always keep an eye on how your property portfolio’s performance. For those who are starting a property portfolio later in life, the whole idea is not to fear the process or that you may have missed the opportunity. It’s best to find out exactly what is possible. If your goal is to have an income stream of $100,000 per annum in retirement, it's really about getting as much capital growth and cashflow as you can out of your portfolio.
Make your income work for you by investing in high-growth assets
Be wise with the income you earn and put it to work in order to cover your retirement goals. Building a portfolio when you’ve got a regular income behind you is much easier when you keep that endpoint at the forefront of your mind. Seek lower rates where you can, keep an eye on your property management team and supercharge your income to build your rock solid portfolio. By using the right strategy, with the right properties purchased in the right places, it will make your dreams a reality.
Original article: http://www.apimagazine.com.au/property-investment/5-tips-for-building-a-rock-solid-property-portfolio