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5 steps to building a successful property portfolio

A successful property portfolio doesn’t happen overnight, but with a great plan, a solid strategy and ongoing review of your circumstances, your property portfolio can secure your financial freedom. Here are our 5 steps to building a successful property portfolio!

1. Prioritise a steady income and get on top of your tax!

Forget what you’ve been told – you do not need to earn a 6 or 7-figure income to build a wildly successful property portfolio. However, it is important to make earning a steady and reliable income a top priority when you first decide to become a property investor. A steady income makes getting a loan from a bank or lender a walk in the park in comparison to trying to get finance when your income fluctuates.

Getting an investment property loan can be an issue for sole traders and small business owners who are unable to provide consistent pay slips, as well those who work on a casual or part-time basis. If you fit into this category, the best solution is to make sure you’re up-to-date with your tax returns.

As most banks struggle to understand how self-employed people make a living, most banks will want you to provide at least 2 years worth of tax returns before they will even consider your application!

2. The bigger your deposit, the better

Yes, it is possible to get a low deposit loan (5-8%), but if you want to kick start equity and not pay Lenders Mortgage Insurance (LMI) you’re better off aiming for that 20% deposit.

Lenders Mortgage Insurance (LMI) is basically insurance to protect your lender if you cannot repay your mortgage and it comes at a hefty price. More equity means more opportunity, so if you can avoid LMI you will save money.

If you don’t quite have enough income or savings to get into property investment but you just don’t want to wait any longer, consider a joint venture with someone you know and trust, and is in a similar position to you. Always best to chat with trusted advisors before going down this path.

3. Choose you first property wisely

This is probably the most important step, so take your time and do your research. Before you even start looking at properties, you need to think about your strategy and devise a plan to reach your goals. Buying the first property you can afford and just ‘winging it’ is not the way to build a successful property portfolio. Your first property should enable you to grow your equity so you can have leverage to launch into your next investment as soon as possible.

When you’re just getting started, you may want to consider using a buyer’s agent or joining a property group to locate a good property investment.

4. Increase the property value to grow your equity

Increasing the value of your investment to grow your equity is the key step in building a successful property portfolio. There are many ways to add value to your investment property, including renovations and extensions, land subdivision, or adding a dual occupancy.

When you increase the value of your initial property, your equity increases. At this point, you’re able to make the leap from owning an investment property to building a property portfolio by leveraging your equity (AKA untapped value) to buy another property.

Not only does increasing the value of your property grow your equity, but it also increases that property’s appeal to potential tenant and generates a higher rental return. Even if you only increase the rent by $5 per week, you must increase it every year. This is essential for investors who want to build a successful property portfolio quickly.

Repeating steps 3 and 4 over and over again will build your property portfolio and set you up for financial freedom. The hardest part is getting started, but once that’s done and you know how to spot a great opportunity, all you have to do is buy a property, add value, then draw on equity to buy another property. Simple huh…!

5. Collaborate with an investment property tax specialist

If you’re serious about building a successful property portfolio and think any old accountant will do – think again. Knowing which deductions you can claim each financial year is the key to investment property success, but there are so many great money-saving tax deductions that go unclaimed every year.

An investment property tax specialist can give you expert advice and devise strategies to help reduce your taxes to improve your cash flow, ensure you claim every deduction you are entitled to, and show you the safest way to structure your debt and set up your investment portfolio to protect your assets. They can also review your circumstances to let you know whether you’d benefit most from your investments being held in a personal name, a joint name, an investment trust or a Self-Managed Super Fund (SMSF).

You’ll have an even greater advantage if you team up with an accountant who offers affordable software solutions built specifically for property investors, like TaxTank. Property investors can join TaxTank for free on a 14-day trial!


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Important Tax Deadlines

For all incomes earned between 01 July 2023 – 30 June 2024.  

Tax returns can be lodged from 01 July 2024. You can prepare early with TaxTank so you know exactly what’s going on ahead of time.

For all incomes earned between 01 July 2022 – 30 June 2023.  

Tax returns are now OVERDUE.  

You can use TaxTank to get up to date and lodge with our partner accountants.

Tax returns are OVERDUE.  

You can use TaxTank to get up to date and lodge with our partner accountants.

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