As with most asset portfolios, everything grows from the first successful investment. With residential property portfolios, the trick is to buy one property and use the increase in value of that property to buy your next property. And so it goes on. Let’s consider that you buy an investment property for say, $500,000.
In the first year, the probable net return (before interest) on that investment would be approximately $20,000. After paying interest and claiming tax deductions, the net cost of your investment might be approximately $4,000 in the first year. However, in the first year, your property might grow in value by, say $40,000. That is a net accumulation in wealth of $36,000. Not bad!
So how does this help you to buy a second or third property? Well, let’s say you purchase good quality property in Sydney Eastern Suburbs, as the years go on, your property value should also increase, year after year as you add value with a paint job, basic renovations and the general movement in the market. And the net cost after interest and depreciation will reduce such that within a few years, the net cost could become a net gain. You can use this increase in property value and net cash-flow to provide the equity to buy your second property. And the cycle of portfolio building goes on and on, until you are a property portfolio owner. It is really that simple Of course, there is some detail in this strategy and it will only work if you make the right investment decisions and surround yourself with experienced experts that can guide you as you grow your property portfolio. We can show you how this strategy can fit with your current financial position so that you can build an asset base for your future by drawing down equity and using it as a deposit together with a no deposit home loan.
If you are driven to become a property portfolio owner and have any questions, then please see one of our Investment Property Specialists will contact you to discuss your questions in detail.