By Rich Harvey, CEO & Founder, propertybuyer.com.au
Property investors are aspirational. They’re goal oriented and motivated to achieve their desired financial outcomes through real estate. Their process involves planning, risk assessment and other decisions that will result in fiscal independence.
Unfortunately, in these times of rising rents and falling vacancies, investors are all too often viewed collectively as deep pocketed, high-net wealth individuals snapping up all the available homes to the exclusion of others.
But this is a long way from the truth. Most investors don’t have more than one property. In fact, you might be surprised to learn exactly how many people own extensive portfolios, and what it really takes to be among these ‘one percenters’.
The real stats
Widely quoted ATO numbers show that just over 2 million Australians are property investors.
Of this number around 70 per cent own one investment property, 20 per cent own two investments, six per cent own three assets and two per cent own four. Just one per cent of all investors own five properties, and less than one per cent own six or more investments.
Put another way, of Australia’s total population of 25.69 million, less than 100,000 – or 0.4 per cent - own four or more investment properties.
That’s a miniscule percentage given how much time is spent pillorying property investors across politics and the media.
But here’s another thing I know about that group of 100,000 who own impressive multi-property portfolios – not all are not earning hundreds of thousands in their day job. There are plenty of ordinary, everyday Aussies who made smart choices to help them retire pension-free and enjoying a comfortable life.
So, what does it take to join the one percenters?
- Planning
If you fail to plan, you plan to fail. Almost every four-property-plus investor I know began with a plan.
Firstly, define your goals. How much annual income do you want to retire on? What does that look like in terms of assets and income?
Also, do a comprehensive assessment of the resources you have at your disposal. What’s your income and outgoings? What can you afford to devote to loan repayments?
What equity do you have in your home? What other assets do you own?
You must also strategise about the future and how it will affect your investment journey. Are you planning on having kids? Will you be moving to a new city? Are you in line for a promotion and pay rise?
It’s about laying out a path that will lead to the outcome you desire. This defines the way your equity grows and compounds, providing a foundation that will finance additional investment.
- Professional guidance
Few successful investors get to where they want without relying on advice from professionals. This will include financial advisors, mortgage brokers, accountants and legal representatives. Most important of all, they will seek advice from real estate experts such as buyers’ advocates who understand the property market landscape.
Even low-income earners can use specialists to help select affordable investment options that will have great fundamentals for rent return and capital gain.
- Property selection and strategy
Picking the right property strategy to suit your income, budget and life stage is critically important. This is where buyers’ advocates really comes into their own. By understanding how much you can afford to invest and what rent return you’ll require, a skilled buyers’ advocate can hunt down and shortlist investment options that will meet your needs.
And that includes those with modest budgets.
Most investment properties are purchase for between $500,000 and $1 million and those at the lower price point can do exceedingly well in terms of capital growth.
Selecting the right asset is key to success and doing that without the help of a professional is like shooting an arrow at a target in a pitch-black room. You may hit the bullseye, but it will require a healthy dose of luck. Instead, let your buyers’ advocate light the path.
- Patience
Building a multi-property portfolio takes time. You need persistence and patience.
The property market will rise and fall. There will be times when real estate prices are booming, and moments when they soften. There will be occasions where you can increase rents, and other months when it’ll be tough to secure a tenant.
Through all this the patient, long-term property investor knows that compound interest and rising rents will offset the speedbumps and smooth the journey.
And ultimately this will result in an excellent portfolio of outstanding assets that have gone up in value substantially over time.
To create real wealth does not require massive incomes – just judicious and regular financial discipline. When it comes time to begin your property investment journey, be sure to have a buyers’ advocate on your team. They can discuss your needs and help unearth options that will set you on the path to joining the one percenters.
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