When it comes to building a successful property portfolio, it is crucial to consider both your finance and property strategy. Depending on your financial circumstances in relation to debts, expenditure, income and cash flows, this will ultimately determine the best property strategy for you moving forward as no two individuals are the same. To help you get started, we’ve identified the top considerations when building a winning plan for long term wealth creation:
Debt Management
Before you can get started in property investment, it is crucial to review your current and foreseeable debts. If you have considerable debts, in order to increase your borrowing capacity you would need to look at paying those debts down to a more manageable level. Lenders will evaluate this closely to ensure you can meet monthly repayments, this deemed as being your serviceability.
Cash Flows
To ensure that your portfolio manages the costs of the investments independently, money coming into your account should be more than what is going out, demonstrating a positive cash flow. By showing this on a month by month basis, it creates contingency in the event unforeseen costs/circumstances arise.
Borrowing Capacity
Your borrowing capacity is the determining factor of what you are able to borrow and therefore determines what you can afford to buy and where. By acquiring properties that are positively geared, this will have a better effect on your borrowing capacity. If a property is negatively geared, this will greatly hinder your borrowing capacity as it shows the bank that you are having to use your personal income to fund the investment which affects your net disposable income, negatively impacting your serviceability on future loans.
Master Facility
Leveraging a master facility, this will essentially act as your ‘business account’, creating a firewall that separates your personal finances from your investments. Through this method, it continues to mitigate risk in the event there are some challenges/losses in your property portfolio and will not impact your personal finances (i.e. day to day expenses, bills, family expenses etc.). This has a number of purposes, mainly to manage the running of the investments and create contingencies for building capital within the facility through cash flows.
Diversifying Your Portfolio
Rather than putting all your eggs in one basket and generating a high risk approach, it is best to have a balanced and diversified approach by acquiring properties in different locations to mitigate risk and capitalise on property cycles.
The main reason everyday Aussies approach AllianceCorp is because they realise their income alone will not enable them to achieve their financial goals. What most people don’t understand however is that one or two investment properties, particularly those purchased without professional advice, will barely make a dent in their long term plans.
Building a successful property portfolio is like running a business – it starts with a strategy. At AllianceCorp, our Property Wealth Creation service looks to provide a tailored property investment blueprint, built for success that begins with:
- Understanding your current financial position and putting in place a plan to consolidate any bad debt
- Discussing and establishing realistic financial goals
- Understanding the different property types and locations available and determining where and what to buy based on your financial capability
- Developing a finance strategy that protects your borrowing capacity to allow for future investment
- Engaging a network of professionals to assist with education on finance, locations and more
- And most importantly, how you can continue to stay educated about the market movements to ensure you make the right move
For more information on how you can create a property portfolio built for success, fill out the form below to request a no-obligation, 45-minute consultation with a Senior Property Wealth Planner valued at $495 absolutely free!