The objective of this step is to introduce you to the incredible power of property investment through building a personal property portfolio.
You are not going to achieve your objectives of early retirement, or funding your children’s education by buying one property and sitting back.
Remember the lesson learned in the game of Monopoly
4 green houses = 1 red hotel.
When you initially venture off on this journey of property investment you will not know all the amazing advantages you are opening yourself up to. You are venturing off on a journey of discovery of how the rich grow their wealth.
This is the fun part, watching your first investment property slowly growing into a portfolio of properties. There are many financing options and strategies available to the investor, but they all distil down into the following basic strategy.
Buy your first income producing property. When your property is running smoothly, and monthly cashflow is neutral or positive (that is, you are making a monthly profit) it is time to purchase your next property.
Next you put your energy into sourcing and selecting your second investment property. Use surplus income from the first property to make this possible in two ways. Firstly, after property one has grown in value you can access the equity in the property by refinancing it to provide the deposit on the second property, or use the excess rental income to subsidise the bond repayments for property two.
Once property 1 and 2 are both established and growing, repeat the process, but with the advantage of now having two properties to subsidise your property number three
And so the investment cycle continues;
Save up a deposit (or access the equity in your existing properties)
Acquire the next property
Manage the cashflow
Do it again
You will find that the properties get easier and easier to hold and finance as your portfolio grows. The current (2013) banking environment across the world is making this difficult, but we are already seeing the banks relax their lending criteria as funding eases up. It is important to note here that a bank’s primary business is to borrow money from the national reserve bank and re-lend it out to their clients at a premium.
Remember, that lending money against property is the bank’s safest lending environment.
That says a lot!
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