Growing a property portfolio in a falling market

By following five key strategies, it's possible to build a future-proofed property portfolio while investing in a declining real estate market.

Property types, including apartment, house and granny flat.
Building a property portfolio that is not entirely reliant on capital growth will help deliver longer-term cash flow and benefits. (Image source:

As many markets around the country are now entering into a buyer’s market it will be a good time to be buying property

But if you bought in the past two years, you may be worried you have paid too much for your property and concerned how you are able to grow your portfolio in a declining market.

Many investors will grow a property portfolio by using the equity gained in one property to assist in purchasing their next property.

By pulling out the equity in one property they can use this for the deposit of the next purchase and continue this process to grow a solid property portfolio.

If you are smart about your property strategy, then a declining property market doesn’t always mean the value of your property portfolio will be declining. There is still equity to be made in a property portfolio when the market is declining even if your capital gains are sluggish.

It is important to realise that organic capital growth isn’t the only way to make equity on a property and smart investors look to investment strategies that build a property portfolio that isn’t reliant only on the market conditions.

When you begin to invest in property in a way that you are not reliant on the capital growth of the market to make your returns, you will also be future-proofing your portfolio from any market declines and when the market has strong capital growth this will be a bonus.

Ways to build equity in your portfolio, without relying on capital growth:

1. Renovation
A renovation doesn’t need to be a major structural overhaul to create equity in a property.

If you do a basic cosmetic upgrade such as new window coverings, new floorings, basic kitchen or bathroom upgrade or create open plan living, you might be adding as much equity to your property as $3 for every $1 spent on the renovation.

Even getting out your green thumb and improving the landscaping could add some additional value to your property. If you complete some of the renovation yourself you can save a lot of money on labour costs.

It is, however, important to be careful when completing D.I.Y projects and know when to get the help of expert electricians, plumbers, and carpenters.

2. Subdivision

Another way to manufacture equity is if you own a large block you may be able to subdivide the block and instantly have two land titles, which is more valuable than one title, and this will increase the equity in your portfolio.

3. Development
A development project, like a duplex or townhouse development, is a tried and tested strategy to gain strong equity in your portfolio. It can help you to move forward without relying only on the capital growth of the market.

Building a duplex then subdividing the properties will ultimately give you two properties for the price of one and a whole lot of equity in your portfolio that can be used to purchase another investment property and grow your portfolio.

What is great about a duplex development is that you have a lot of choice, whether to keep both, sell both, or keep one and sell one. Some investors decide to sell one and use the money for the deposit on their next property purchase or to pay down other debt.

4. Granny Flats

Adding a granny flat to your property will provide additional rooms to a property but also serves as an additional source of income and rental yield on a property.

Be mindful that the rules around granny flats will differ from state to state. A granny flat is not all about equity but the improved cash flow will help future-proof your portfolio.

5. It’s not always about equity

Building a property portfolio isn’t always about creating ways to make equity on your properties.

Renovations and developments can be costly projects that you may not have the time or the spare cash to complete right now and if this is the case for you, there are other ways besides manufacturing equity to build your portfolio.

Another strategy is to focus on positively geared and positive cash flow properties. By holding properties that are bringing cash into your portfolio, this will not only help to mitigate the pressures of rising interest rates on your mortgage repayments, but will assist your borrowing capacity (the amount of money the banks are willing to lend you).

If you have strong borrowing capacity, you can borrow additional cash from the banks to build your property portfolio.

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