Growing Wealth Through Property
The path to financial prosperity is not always straightforward, cheap, or easy; however, it is widely acknowledged and consistently proven over time, that one of the most solid ways to build wealth is through property acquisition.
Outlined below are a few key steps to consider when building a property portfolio:
Goal Setting: this is a fundamental first step. What do you want to achieve (for example early retirement)? What is your timeline? What are your expectations for the future? Take your time to finetune this, and remember it is an organic process that can be altered over time as lifestyle circumstances change. Think big but also realistically.
Financial Audit: yes, that old chestnut – we can all dream, but we do need access to capital to purchase property, it does not come cheap. In most circumstances you can draw on equity built up in existing properties, and in the majority of cases this equity is what is used to continuing adding to a portfolio. However, you will still need a minimum deposit (usually five per cent of purchase price), and there’s always additional costs, such as lender’s mortgage insurance, stamp duty etc…
Yes, you will need to budget, and you will need to continually review your budget to ensure you stay on track to fulfil your financial obligations to the lenders. Budgeting generally requires sacrifice, so if its time to trim some fat in order to build your empire, then get the process started ASAP. But remember, you still have to have a life in the meantime, so don’t be too hard on yourself; it’s all about balance.
Borrowing Capacity: it is critical to know how much you can borrow prior to commencing your search for property, as this is a driving factor in what and where you can purchase. It is also important to review your budget too when you find this out, as just because the bank will lend you $xyz doesn’t mean you should borrow to your maximum – you need to be comfortable servicing the amount, and you will want some type of buffer in the event of unforeseen occurrences, for example, job loss.
It is well worth consulting with a good mortgage broker to assist you with this, so you have access to a variety of lenders and products.
If you are looking at commencing a property investment portfolio or adding to an existing portfolio – here at Laing+Simmons we can assist you with information regarding rental returns/projections, high growth areas, and useful local market intelligence that may help you select the right property that meets your goals within budget.