Why You Shouldn't Stop At Your First Investment Property

Statistics show that, no matter how great their ambitions are, most investors will not make it past their first property. For some, this is a conscious choice, as it supplements their income without exposing them to too much financial risk. However, for most investors, achieving their goals will require much more than just one or two properties.

Here we look at why we believe it is well worth thinking big and aiming to add to your portfolio. We also share a few tricks to getting your portfolio growing and avoiding being stuck on a single property.?

The benefits of owning more than one investment property

To put it simply, the bigger your property portfolio is, the bigger your returns could be.

For example, if you have more than one investment property, you will have more than one source of rental income. This is particularly beneficial when your properties are positively geared, as each addition to your portfolio increases your passive income. And the extra cash you receive can supplement your other income or be used to fund further property purchases.

Owning multiple investment properties also gives you multiple opportunities to build equity and achieve capital growth. This can then be released by selling your properties and used to fund everything from your own home purchase to your retirement. Or you can leverage your additional equity to buy further investment properties, creating even more opportunities for capital growth.?

Having more than one investment property also allows you to manage your financial risk. By varying the locations you buy in and the type of properties you target, you create balance in your portfolio. This means that, if one property underperforms, the impact should be minimal, as it should be offset by the others.?

Finally, and arguably most importantly, a larger portfolio will help you achieve your investment goals and secure your financial future. While the income from one investment property can help improve your lifestyle, it is unlikely to make a big difference. But the additional wealth you can build through multiple investment properties will give you options and can be truly life changing.?

Tips for growing beyond your first investment

While it is easy to say you want a large property portfolio, actually building one takes commitment and careful planning. That said, there are a few simple things you can do to make growing your portfolio easier. This includes:

• Focus on positively geared properties: It is hard to add to your portfolio when you are always covering the costs of your existing properties. As such, it is much better to look for an initial investment that will at least cover its own expenses. Even better if it provides a passive income, as this can be put toward a deposit for your next purchase.
• Start smaller: While more affordable properties will usually produce smaller returns in actual dollar terms, their yields are often much higher. This, combined with the lower cost of entry, makes them the ideal option for those just starting their investment journey. And remember, it is good to leave a little cash in reserve, just in case you encounter any unexpected costs.
• Maximise your serviceability: When you apply for finance, the lender will want to see that you can afford the repayments. As such, the more disposable income you can show you have, the more likely you are to be approved. So, consider reducing your credit card limits and shifting to interest only mortgages, as this will boost your serviceability.
• Work with an experienced mortgage broker: When selecting your mortgage broker, you should try to find one with significant experience working with property investors. This should mean that they know which lenders are more willing to look at applicants with multiple mortgages. They should also be able to recommend easy ways to maximise your serviceability or improve the strength of your applications.

Need help growing your investments?

Search Party Property’s Portfolio Accelerator model is based on over two decades of investing experience. It is designed to build high-performing portfolios quickly and has helped many investors purchase multiple properties in just a couple of years. For more information on our investment model, or to arrange your free investment assessment session, contact us today.