Why building a wealth-generating property portfolio requires solid foundations

Andrew Carnegie famously said 90% of all millionaires grow rich through investing in property.

While there isn’t any hard data to back up Carnegie’s claim, you only have to glance at?The Australian Rich List?to see why property investment is a popular way of building wealth in our country, with 59 property moguls included in the 2022 edition.

In fact, according to the?Australian Taxation Office’s most recent statistics,?over 2.2 million people hold an investment property, which works out to about 20% of all Australian households.?

But if you dig into the data, you’ll discover something interesting:

• 71% of property investors hold only one investment property
• 4% of investors own four or more properties
• 1% own six or more

Quality is always better than quantity. That said, owning a single investment property is unlikely to generate enough passive income to secure your financial freedom. For that, you need a property portfolio.?

So where do most property investors go wrong?

It’s not from lack of trying. Rather, it’s because most investors don’t buy the right property at the right price. And much like building a house, the key to success is to start with strong foundations.

You need to get things right from the start

Investing in property can be a great way to build wealth. But it’s not as simple as buying any old property and hoping for the best.

That’s because not every property makes a good investment, whether that’s because it’s in the wrong location, it’s priced too high or it isn’t attractive to quality tenants.

All these factors can impact the property’s value and tie up cashflow, making it harder for you to leverage your investment.

Leverage is when you borrow money to buy a property, instead of funding the purchase entirely with your own savings. It’s one of the main tools property investors use to expand their portfolios as you can leverage the equity in one property to buy another property. This process can be repeated again to buy more properties, scaling your portfolio.

That’s why the first investment property you buy is arguably the most important.

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