YOUR PATH TO PROPERTY WEALTH: 10 WAYS TO BUILD AN INVESTMENT PORTFOLIO
Your property empire is not going to build itself. If you want to build an investment property portfolio, here are our top ten ways to get started:
1. VIEW AS MANY PROPERTIES AS POSSIBLE
You will make a better investment if you know the market. Study the areas you want to invest in and get to know them well. Visit properties regularly, whether you’re ready to buy or not, to familiarise yourself with what’s available. Take note of pricing trends, average rental income, and how long properties stay on the market. This will give you a solid foundation to identify a good deal when it comes along.
2. UNDERSTAND LOCAL DEMOGRAPHICS
Knowing the market extends beyond property prices. Understand the population dynamics, employment opportunities, and the types of people likely to rent or buy in that area. Are they students, young professionals, or families? By knowing this, you can tailor your property search to the needs of that group, ensuring your investment has long-term viability and rental demand.
3. SET UP YOUR TRUST STRUCTURES
You need your Family Trust, Holdings Trust and Property Company in place before submitting an offer to purchase. Remember, buying (even one) property in your name leaves you exposed and affects your ability to obtain financing for future investment properties. By using the correct structure, you are not only protecting your personal assets, but you are also improving your tax efficiency and ensuring smoother estate planning down the line. This structure will allow you to grow your portfolio more strategically.
Watch our YouTube video, Why You Need At Least Two Trusts.
4. BUILD YOUR CREDIT RECORD
A good credit record is necessary to obtain financing. Always pay your bills on time and don’t ever allow a debit order to bounce. You need credit to get credit, so make sure you at least have a small clothing account, credit card, and cell phone account in your name. The higher your credit score, the better your chance of getting 100% financing at a good interest rate. However, don’t stop there—ensure you periodically check your credit report for accuracy. Small errors or overlooked accounts can reduce your score without you realising it.
Read our article, 5 Ways to Finance your Properties.
5. BANK WISELY
If you want to get 100% financing for multiple investment properties in an entity such as a property company, make sure your bank gives 100% financing for entities. It doesn’t help if your bank has a policy of only giving 80% financing for entities. It also doesn’t help to buy in your name only to get 100% financing, because what about your future investment properties? Choose a bank that aligns with your long-term property goals, and develop a solid relationship with your banker—they can sometimes push things through for you.
6. EARN A SALARY ON A PAYSLIP
Whether you work for an employer or yourself, make sure you have a payslip with PAYE and UIF on it. Your gross salary should be at least three times the amount of the monthly bond payment on the bond you wish to obtain. Remember, banks love people who earn salaries. If you’re self-employed, you may need to jump through more hoops, like providing multiple years of income statements, but having a consistent salary will still improve your chances.
7. HAVE A FINANCIAL SAFETY NET
Before diving into property investment, ensure you have a financial cushion for unexpected expenses. There may be times when a tenant moves out suddenly, or the property requires maintenance that insurance doesn’t cover. Having at least six months’ worth of expenses in savings will prevent you from becoming financially stressed and allow you to manage your portfolio with confidence.
8. RESEARCH TAX IMPLICATIONS
One area many beginner property investors overlook is the tax implications of owning multiple properties. There are taxes on rental income, capital gains when selling properties, and potential deductions for expenses like maintenance, interest, and professional fees. Consult a tax expert or property accountant to understand how to minimise your tax burden legally and efficiently.
9. NETWORK WITH OTHER INVESTORS
Joining a property investment group or attending networking events can provide insights you wouldn’t learn by reading books alone. Other investors can help you avoid pitfalls, share contacts for reliable service providers (like contractors and agents), and even introduce you to off-market deals. The more you network, the more opportunities you’ll discover.
10. STAY UPDATED ON PROPERTY LAW CHANGES
The property market is always shifting, not just in terms of prices but in regulations as well. Stay informed on any changes to property laws, tenant rights, or financing rules that could affect your portfolio. For instance, rent control laws or changes in capital gains taxes can impact your strategy. By staying ahead of these changes, you can adapt your plans and mitigate risks.
Watch our YouTube video, How to Build a Property Empire.
And there you have it… Now your agenda can be – Building my empire!
Read the entire article in the November Edition of Real Estate Investor Magazine.