It's funny all the metaphors we use in the residential property investment game. Building your portfolio, growing your wealth – investment really does seem to take on a life of its own! Think of your portfolio like a living, breathing creature. You can feed it, nurture it and soon enough, it will be working for you.
So where you do you start? Success can seem like a sure thing in Auckland with property prices rising as they are. In fact, with just one look new figures from Trademe Property and you'll be blown away. The average asking price has increase by an incredible ten times the average increase across the rest of the country over the past 12 months – just think of all the potential for capital gains!
But it's not all about putting all your eggs in one basket. Here are a few tips for creating a well-rounded portfolio.
In it for the cash (and the long-term play)
As with a lot of things in life, a bit of balance can go a long way. For some investors, a balanced portfolio can mean a mixture of property types, like apartments, units and houses. It might also mean owning investments in a variety of different places, depending on the potential for capital growth versus rental income.
You might combine cash flow properties with homes earning high capital growth – like a townhouse in Auckland, and another investment property in Hamilton providing a solid rental income.
Cash flow properties are the ones that earn you enough rental income to cover expenses like mortgage repayments and maintenance. If all goes well, it might even be making a profit, giving you a little extra in the kitty.
On the other hand, capital growth properties grow steadily in value over time. This is a key point for expanding your portfolio! Growing the equity in your properties can give a handy boost to your borrowing power further down the line.
Creating a road map
A strong portfolio can mean a different thing to everyone. It depends on your financial position, as well as your goals and ambition. These factors should have a big influence on the route you take, the tax structures you choose, as well as the finance you decide to get – which is where a financial strategy and property investment advice can mean the world.
The strategy you employ in the early stages acts as a roadmap for future investments, and your adviser can help you reach all your goals along the way.
Your strategy also depends on the level of risk you can handle, which is where our team here at Goodlife can help. We can help you become aware of the various risks and make informed decisions.
Here's to your financial independence!
Authorised Financial Adviser / Investment Property Expert
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