How to build your property portfolio

Countless new investors aspire to have a complete real estate portfolio. However, knowing how to get there might be difficult when you’ve only recently acquired one real estate. With that in mind, here’s a step-by-step approach to growing your real estate portfolio. You’ll discover tips on how to build one yourself.

While each portfolio is unique, they all serve the same purpose: to assist real estate investors move closer to their investment goals. While many investors want to construct a profile that would allow them to attain financial independence, others utilise their portfolios to attain more practical goals, like as funding for their children’s college educations or planning for retirement.

How to use the equity in your home

Home equity is an investor’s best friend. It provides you with the ability to purchase a nicer home or invest. But what exactly is it? The gap between what you owe and what your home is worth is referred to as equity. The more your neighborhood’s values have climbed since you purchased, the larger your sweet piece of equity may be!

Begin with a property valuation to compute it. A real estate agent or a bank can help you with this. Depending on your circumstances, you may be able to borrow up to 80% of the value of your home.

Consider expanding your equity if it looks more like crumbs than the cake you imagined. Make higher monthly payments, create an offset account to decrease interest, or do an ingenious remodelling.

What’s your property investment strategy?

Because the whole objective of developing and managing a real estate portfolio is to help you reach your financial goals, the initial step is to have a strong vision for what you want your portfolio to accomplish.

Are you an investor looking for a new source of consistent monthly income to help you pay your bills? Or do you want to start a business that will help you to attain financial independence? Are you interested in rental yield depending on criteria such as property type, location, and the economy? Do you favor capital growth if you have a good income and your mortgage is paid off? Ideally, you’ll be able to find both. Or are you going to negatively gear for tax cuts?  Consult a specialist for tax and financial guidance. As the old saying goes, if you pay peanuts, you’ll get monkeys.

After you’ve determined your portfolio and investment strategy objectives, the following stage is to develop your real estate investing business plan. While this may appear to be a lot of work, it is worthwhile. A business plan will assist you in defining precise, shorter-term goals, moving closer to attaining your goals, and defining the tactics you plan to employ to meet those goals.

Additionally, while it is not required, if you want to bring in partners to assist you fund or manage your initial investment potential, having a comprehensive business plan might help persuade them that you are committed.

Do your research

When you’re prepared to go, the research process begins. You’ll discover which marketplaces are popular and which are not, and you’ll choose a location. Then there are rental yields, demographics, median pricing, and clearing rates… What will your rent-to-repayment ratio be? Can negative gearing do the job? Are there any upcoming public transportation improvements or new schools that will promote capital growth? Is there a high-rise projected for the next street? Your new pastime is investigation!

You should collaborate with a group of real estate industry specialists, including a real estate agent and a mortgage broker. They can assist you in determining the finest real estate bargains and financing options for you.

When it comes to purchasing an investment property, though, it all boils down to the numbers. Once you’ve identified a property that you believe may be a suitable investment option, conduct an investment property study to ensure it makes financial sense.

Getting finance

A qualified advisor will assist you in assessing your equity, determining how to unlock it, and recommending a course of action. They will also assist you obtain pre-approval, which is a lender’s in-principle confirmation that you may borrow money to buy a dwelling. There are no guarantees, thus the term “pre-approval,” but there is sense of security! Contact us to find out how we can assist you.

Ways to get additional borrowing on your existing mortgage

Additional borrowing implies that when you refinance, you borrow more money, increasing the overall amount of your mortgage. You may then utilise these additional funds to pay for things like house upgrades or school tuition.

Further advance

A further extension is when you borrow extra money from your current mortgage provider. Taking out a second advance is frequently utilised for home upgrades or as a down payment on a second house.

When you ask for a further advance, your mortgage lender will go over your budget with you and analyse your earnings and cash outflows (such as other loan obligations and living expenses) to ensure you can keep up with your payments.

It’s crucial to remember that the extra cash you take out will be tied to your home, which you may lose if you can’t keep up with your mortgage payments.

Refinancing

Refinancing is the process of transferring your mortgage debt to a new mortgage arrangement, either with your current lender or with a new lender. When you refinance, you can also borrow additional money by expanding the amount of your mortgage loan.

As you refinance, you will be asked if you want to borrow more money. If you wish to lend more, we will ask how much more you want to borrow and what you plan to use the funds for, such as home upgrades, debt consolidation, car purchases, etc.

Lenders may ask you more questions if your additional loan is considerable (often more than $30,000). However, a lender’s judgement on your application to borrow extra money will be based on their affordability assessment.

Second charge mortgage

A second charge mortgage is a sort of secured loan that borrows extra funds by using your home as collateral. You can use the equity in your house as collateral for a new loan. This implies you’ll need to have some equity (wealth accumulated in your current property) in order to apply for more loans.

To determine how much equity you have in your house, subtract the amount owed on your first mortgage from the value of your property. So, if your house is worth $750,000 and you have a mortgage for $500,000, your capital or equity is $250,000.

To get a second charge mortgage, you must first obtain approval from your present mortgage lender and then demonstrate to the second mortgage lender that you can afford to make the instalments on both loans.

Is it a good idea to borrow more on your mortgage?

The benefits and drawbacks of borrowing more on your mortgage are determined by your specific financial situation.

There are risks associated with extra borrowing because you would be borrowing over your property. This implies that if you cannot keep up with your repayments, your house is in jeopardy. With this in light, it may be worthwhile to investigate alternatives to borrowing on your mortgage, such as obtaining an unsecured loan.

If you opt to receive a further extension on your mortgage, it may impair your future capacity to refinance. You may have to pay a charge to exit your existing mortgage arrangement, and the process might take 6-8 weeks.

You must ensure that the value of your home has grown above the amount borrowed for the mortgage (known as having equity in your property). If you want to borrow more on your mortgage, make sure you can afford to make the payments. If you are unable to make your repayments, your house may be seized by the lender.

What can I use the additional money for?

Whenever you refinance, you will be asked if you want any extra borrowing. If you say yes, you will be asked you how much amount you want to borrow and what you plan to use it for. For example, you will be asked to select one of the following options:

  • Home improvements
  • School fees
  • Divorce settlement
  • Debt consolidation
  • Car purchase
  • Other property purchase
  • Other

If you think this is something that will help you make some of those renovation or other finance plans come true then give us a ring and we can discuss further on how can we make it happen.