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HOW TO BUILD A PORTFOLIO OF MULTIPLE PROPERTIES

Owning multiple properties can bring a great sense of achievement, freedom and financial gains. However, it can also cause strain on relationships, worry of potential loss and negative cash flow. So how does one acquire multiple properties?

Going down this avenue as an investor is not for the faint hearted. Ideally, an investor needs to do the research to lower the risk and be an entrepreneur in finding funds to assist in buying the investments. There are two main reasons for wanting to own multiple properties. One is to build enough positive cash flow to provide a regular income, or to buy and then later sell the properties, to earn capital gains.

Buying your first property, with the goal in sight to purchase another one in a couple of years, is a courageous move. How does it work? There are many ways for this to happen. Do your research on the area of where you want to purchase. Make sure the timing is right. Purchasing a bargain will add equity to your properties quicker than buying at a time where the market is at its peak. Find a great real estate agent within the area that has multiple homes on the market. Understand the additional costs when purchasing units or townhouses compared to a house. Do the same research you would if you were buying your own home.

How do you source funds for the down payment?

You can use the equity in your first property to help as a down payment for your second property. Or you can use the cash flow received from the first property to use as a down payment for the second one. Generally, focus on purchasing smaller priced homes first, so you have more money to play with, but the same rules apply when purchasing any property. Look for growth, location and return of investment.

Obviously, the big trap is being unable to pay multiple mortgages. To keep costs down, an interest only loan may be an option. Try to aim to receive positive cash flow in your properties. Although you pay tax for income received, as compared to a property that is negatively geared, you win out overall. If you receive cash flow that pays for the mortgage for that property then you do not have to take out any money from your own pocket. Your investment is paying for itself. And while your investment is paying off that mortgage, you can then do the research in purchasing your next property.

If you want to purchase multiple properties within a set timeframe, waiting for the equity to build from one of your properties may not be an option. This is where you need to get creative in sourcing funds for your next property. You may want to find investors to help fund your future investments or speak with our Mortgage Managers in finding a loan to suit your needs.

Make sure you have clear goals, timeframes and most importantly, a well monitored budget. Budgeting for each property to include upkeep costs, rates etc as well the amount of cash flow received after these expenses will help you see clearly how much you can put aside for your next investment.

Enjoy building your financial portfolio!

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