Investing in property is a fantastic way to build wealth and knowing where to begin is crucial. Whether you’re looking to buy an established property, build new, or even invest in commercial real estate, having the right strategy is key to growing your investment property portfolio.
1. Get Your Finances in Order
The first step in building your investment property portfolio is ensuring your finances are in check. Speak with your accountant and financial advisor to establish a solid financial foundation. You’ll need to decide the best structure for your investment—whether that’s purchasing under your sole name, a trust, a company, or a self-managed super fund (SMSF). Having the right structure is critical for long-term success.
Key Considerations:
Trust vs Sole Ownership: Trusts offer tax benefits and asset protection, while sole ownership may be simpler to manage.
Self-Managed Super Fund (SMSF): If purchasing through an SMSF, strict rules and lending restrictions apply, so professional advice is essential.
2. Choosing the Right Property Type
Deciding whether to invest in an established property, build a new one, or even purchase a commercial property is an important decision. The type of property will depend on your investment goals and the type of tenants you want to attract.
Established Property: If you’re interested in an established property, a buyer’s agent can guide you through market trends, rental yields, and help with negotiations.
Building a New Property: For investors looking to build, research local housing trends. Look at what types of homes are popular in the area and the demographic of tenants—whether it’s families, professionals, or retirees.
Apartment vs Standalone Property vs Commercial:
Apartment: Lower maintenance and cost but come with strata fees.
Standalone Property: Ideal for families and long-term tenants, offering flexibility in rental income and potential growth.
Commercial Property: Higher returns but comes with increased risk and vacancy periods.
3. Securing Financing
Once you’ve decided on a property, securing the right financing is the next step. Speak with your bank or broker to understand your lending options based on the structure you’re using for your investment. The type of financing available will depend on whether you’re investing under a trust, company, or SMSF, and the property type will also impact lending restrictions.
Tips for Financing:
Lending Restrictions: Financing limits vary based on the property type—residential or commercial.
Budget: Understand your financial limits, including upfront costs and ongoing expenses.
4. Market and Suburb Research
It’s crucial to conduct thorough research on the local property market and the suburb you’re investing in. Rental yields, vacancy rates, and recent sales trends will help you understand the investment potential.
Key Research Areas:
Rental Yields: Determine the expected rental income to plan your returns.
Tenant Demographics: Research the types of tenants attracted to the area—families, professionals, or retirees.
Market Trends: Stay informed about property market trends in the area to maximise your investment.
5. Ensure Your Contract is Correct
One of the most important aspects of building your investment property portfolio is ensuring the correct purchasing entity is listed on the contract. If the entity isn’t properly structured, it can lead to significant duty implications or even double transfer duty. The Simple Settlement Co can assist in ensuring your contract is legally sound and properly structured.
Building an investment property portfolio requires careful planning, from financial structuring to market research and selecting the right property. By working with The Simple Settlement Co, you’ll receive professional guidance throughout the process. We’ll work with your investment team to ensure your contracts are correct, your purchasing structure is sound, and your investment journey starts smoothly. With the right support and strategy, you can confidently grow your investment portfolio.