What may seem like a fantasy to some, we often get asked how exactly is it possible to build a property portfolio of 5 properties in the next 5 years?
For some obtaining 5 properties in 5 years is plausible and for others it may mean dipping your toes into the world of investment opportunity in those 5 years. For every person the solution may differ.
Purchasing property requires deposits, stamp duties and a borrowing capacity that allows you to obtain funds.
If you are someone currently renting with only a small amount of cash, then it might not be possible to get 5 in 5. In saying this it may mean within 5 years you buy your first home and use other investment strategies to grow, then over time you can target the 5 properties.
If you are part of a family, you own your own home, have paid off some of your loan and have built decent equity then 5 in 5 might be realistic.
For example, if your home is worth $700,000 and you have $300,000 on your mortgage remaining then you have $400,000 of equity uninvested that can be taken advantage of for the purchase of an investment property.
With a goal of 5 properties in 5 years, it might be more advantageous to seek out neutrally or positively geared properties for your portfolio. Especially so if your income is not unusually strong as negatively geared properties will pull down your income and your borrowing capacity for further purchases. You can work through these queries with the assistance of your accountant, financial planner and a financial strategist.
We can say that maximising the use of your equity is of utmost importance.
For that reason, to achieve 5 in 5 one might look at properties that keep entry costs low. Remember, the less money you put into each purchase, the more you may direct to buy more properties.
Looking at low-cost growth corridors where families are attracted to infrastructure and lifestyle factors is one option for an initial purchase. As is looking at more regional areas where the urban sprawl is starting to reach.
The governments are attempting to build up regional areas, as they realise that when Melbourne is predicted to reach 8 million people in 2050, we will need appropriate centres outside of the big cities to house the massive growth in population.
Once you have 1 or 2 properties, diversification might become a consideration. If your first 2 properties are in Victoria, you might consider purchasing in New South Wales, or elsewhere in the country. Be aware that travel expense claims related to investment properties are no longer tax-deductible. So you won’t be able to go holiday on the Gold Coast and write it off as a tax deduction to visit your sunny Investment Property.
Once you have grown your portfolio to 5 properties, you might choose to hold these properties and allow them to build up some solid equity before any future purchases. By the time you have reached 5 properties your income could be restraining your borrowing capacity in the short term.
Most importantly, having a plan in place is the most important way to see success.
5 properties in 5 years is a bold plan. Maybe you just want to see how you can get your foot on the property ladder and purchase your first investment property. Or maybe your first home. Talk to our knowledgeable team here at Dollars with Sense and see how we can help.
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The information contained on this web site is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs.