How to build a property portfolio without sacrificing your lifestyle

Steve Lansdell, founder and CEO at Linked & Looked After Property Investors, details how, with some initial savings, an impressive property portfolio can be built without major lifestyle sacrifices.

A new home in suburban Perth
Creating equity in the first property is the basis of building a successful property portfolio. (Image source: Linked & Looked After Property Investors)

People don’t buy properties, properties buy properties.

Have I got your attention now?

See, you’ve only got to slog it out and do the hard yards once, which is to save a deposit for your first property.

Whether it’s your first owner-occupier home or investment property, the money doesn’t come out of thin air, so you’ve got to save.

Once you’ve saved the deposit for your first property, it’s all downhill from there.

You can get equity in a few ways; I will discuss the most common two.

One is paying down the loan over time, reducing the total debt on the property; the other is an increase in value, called capital growth.

Portfolio-building theory in practice

As an example, you may have purchased a house in 2016 for $400,000 with a 12 per cent deposit, which means the original loan amount would have been $352,000 at an 88 per cent loan to value ratio (LVR).

You’ve been paying down the loan for approximately eight years and owe $280,000. The value of your home over the eight years has increased to $570,000, which means the equity position in that property is $290,000.

After considering variables such as loan-to-value ratio and the percentage of equity the banks will allow you to use, this scenario yields $177,280 in usable equity.

That’s lazy equity that needs to be put to work to build wealth.

Property acquisition growth phase

You want to use some of that available equity to cover the start-up costs to build a brand-new investment property in a high-growth location.

Why a high-growth location rather than just anywhere, you may ask?

The average market value for property in Australia for the last 60 years has been around 7 per cent per annum.

We want to invest in an area that will grow substantially more in a short to medium timeframe to tap into the investment properties’ new-found equity.

You can repeat the process and go again and again until you've built enough wealth to fund the lifestyle you want to live in retirement; hence, I say properties buy properties.

Finding capital growth suburbs

So, how do you pick the high-growth locations? It would help if you appointed an independent property advisor who understands the contributing factors that influence the Australian property market.

Five major factors play a significant role in increasing a properties growth, and they are:

  1. Economic factors
  2. Supply and demand
  3. Different markets
  4. Property value
  5. Vacancy rates

Essentially, you want to increase value, generate positive cash flow and capitalise on depreciation.

When you can access this data and know what to do with it, you can make accurate strategic decisions about where and when to invest.

Not only do Linked & Looked After Property Investors have leading market data and insights into the thriving Australian property market, but we also offer our clients financial security with guarantees.

When you build an investment property, the five guarantees you need are:

  • a fixed-price contract
  • fixed-price site works
  • guaranteed build time
  • a 25-year structural warranty
  • an exclusive 10-year rental income.

All of this needs to complement the property’s high-growth location.

The Perth property market is booming, and interest rates are about to come down, so if you are working, paying off a mortgage, and want to retire wealthy, it would be a great idea to put your lazy equity to work to build wealth for you and your family.

In this age of technology, physical distance is no longer an obstacle to receiving expert advice. Whether you are in Sydney, Melbourne, Brisbane, or any other part of Australia, research can make the difference between a successful property investment or one that stagnates.

No one wants to work two-thirds of their life to end up living on a pension, which pays next to nothing.

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