How to: Build a property portfolio in seven easy steps

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Many people dream of building an impressive property portfolio in order to live off the generated cash flow later in life. But it’s not always that easy, and the outcomes are not always rosy – so here are seven quick tips to help the average investor climb the property ladder.

1. Time is of the essence

   The sooner you start to build your portfolio the sooner you will be investing in your own financial future. But the time has to be right for you personally, you have to be ready for the commitment and be in the right position financially.

2. Goal Setting

   Those who set goals are already positioning themselves in the right direction and can focus on how to reach those goals. Ask yourself, when do you want to buy your first property? Or your second or third? Make your goals realistic and think clearly about how you plan to reach them.

3. Research

   Mark Bouris of Yellow Brick Road says the best investors spend time attending auctions, monitoring sales trends and tracking suburb growth figures to gain an insight into how much they should expect to pay for their properties.

   Also look for an area that has rental demand. By simply asking someone whether or not a particular suburb is good or not, means you have not done adequate research.

4. Take action

   Rich Harvey of PropertyBuyer says to be successful in property investment, you not only need the knowledge, you need the courage to take action.

   “Most people that go to seminars and read books do not do anything. They gain the theoretical knowledge, but very few use it themselves,” says Harvey.

5. Start on the right path

   The first investment property will often be the most important purchase an investor will make, as poor property selection at the beginning can set you back.

   “The property selection process will dictate whether the buyer will be able to grow their portfolio to a second, third, or fourth investment property,” says Lauren Staley director of Infolio.

   Do you research and make sure you’re going to benefit from your first investment.

6. Diversify your portfolio 

   Investors should diversify their portfolio by buying properties in a range of locations, different suburbs within a city or different stages. A portfolio should also comprise of investment across different price ranges. Mark Armstrong, director of iProperty Plan, says this provides more flexibility when the time comes to sell and free up equity. Armstrong also suggests diversifying between apartments and houses.

7. Build a team of professionals 

   No property investor knows everything so it’s important to get advice from the professionals. Bouris suggests consulting a solicitor or accountant about your tax position as a landlord, use an insurance broker to get the right insurances, and spend some time finding the right property management company.

   Harvey says a critical person on your team is a licensed buyer's agent, who can help you develop a strategy for your situation.

   "Buyer's agents can quickly shortlist the top suburbs for growth or yield using sophisticated research tools. They can uncover off-market deals, new listings and hot properties via their established networks. To understand a local property market can take the average investor months, but using a buyer's agent can take days," says Harvey.

Building a property portfolio isn’t for the average investor; you need to be a super investor willing to put in the hard yards. The first step is to have the courage to take action, do your research and build your own professional team.

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