4/6 How to build a property portfolio from scratch. Ultimate Guide to Success
Hello Property Investors!
Welcome back, we hope you are enjoying this series on mastering the property game in the current market? If you have missed an email, we really suggest you go back and read them!
Building your portfolio from scratch involves two key steps: raising a deposit and accumulating.
Step 1: Raise a deposit
To get started, you need to raise a deposit. Here are some ways to accomplish this:
Option 1: Get a deployment (if you’re in Defense). Consider seeking a deployment on operations, exercises, or courses. Being accommodated and fed during deployment allows you to save money more effectively.
Option 2: DVA compensation payout. Explore potential compensation options outside of Defense. Visit your local RSL and consult with an advocate who can guide you on eligible claims, such as injuries that don’t hinder your deployability.
Option 3: Get family help. Your family can assist you in three ways—gifting you the cash as a deposit, providing a loan that you repay later, or utilising the equity in their own home to secure a loan for you. The latter option involves your family member taking a second loan against their mortgage, with you responsible for the additional repayments.
Option 4: FHO Grants. Take advantage of the First Homeowners Grant, a program that offers financial support for first-time homebuyers.
Option 5: Save, save, save! While saving alone won’t make you wealthy, it can help you accumulate enough for the first deposit. Once you secure your initial property, you can leverage it to build your portfolio further.
Step 2: Accumulate
Imagine purchasing your first property valued at $400,000 with a 90% loan of $360,000. Once you’ve raised the deposit, which amounts to $40,000, plus an additional $20,000 for costs (e.g., stamp duty, legal fees, LMI, inspection), you can proceed.
Once you’ve acquired your first property, you no longer need to save for a deposit. Instead, the value of your property will increase over time, allowing you to borrow more against it. This is known as the Loan to Value Ratio (LVR).
For example, if your mortgage remains at $360,000 and the property’s value rises to $500,000, your LVR would be 90%. In this scenario, the increased property value allows you to access available equity. You can then take out a second loan of up to $90,000 against your first property and use it as a deposit for your next investment.
The key is to focus on obtaining that first property, as subsequent investment properties will work for you. By leveraging your assets and gradually expanding your portfolio, you can create a thriving “orchard” and build your empire. Remember, property investing is a long-term strategy that can lead to significant wealth accumulation.
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Tomorrow, we’ll delve into the 3 golden rules for property investment.
Wishing you success on your property investment journey,
The Integrity Team