How to build a 10-property portfolio without the stress

Everyone wants a comfortable retirement let alone an impressive real estate portfolio but few people realize just how much money it takes to fund it. Very few people will ‘save’ enough money from their paid employment to fund that comfortable retirement they so desperately want.

Realistically, the only way you can do it is to grow your wealth, you could try the share market, and plenty of people have made plenty of money doing that. But one of the most secure ways to build your wealth is through investing in properties.

Unfortunately, many people wrongly think you need to have a lot of money to invest in multiple properties, that’s not correct. And while you need some money to start out, realistically it’s about building equity and using that to fund your continued investment.

Buy and hold

While it’s generally true that the median house price in most capital cities doubles every 10 years, property prices don’t go up in a linear fashion.  The longer you hold on to an investment property, the better you do.

What mostly happens is 25 per cent of all property investors sell within a year and more than half of property investors don’t hold for more than five years.

Reinvest your growth

Most property investors fall into the temptation of selling their property once it has grown a little in value or they rest on the laurels of their success and don’t reinvest the growth into expanding their portfolio.

Around 71 per cent of property investors own just one investment property and that number has hardly changed over the past decade.

Cash flow neutral or positive

Cash flow is like oxygen; run out of it and it’s over very quickly for you. You can’t remove that risk; you can only manage it. The biggest mistake many make is that property investors don’t understand and manage their cash flow.

As a matter of fact, less than half of all property investors – 40 per cent – own properties that are cash flow neutral or positive. That number gets higher and higher as investors own more properties.

Obviously the first step in growing your portfolio of ten properties – or more – is to buy that first one. It shouldn’t just be any property, but one that meets the criteria for a sound investment. That is something with a good land ratio (land appreciates in value, buildings depreciate), a stand-alone new house (units don’t grow in value as quickly as houses and they have no land component) and in a growth corridor (growing population and incomes).

Once that first property grows in value by 10 per cent to 15 per cent, you have enough equity to fuel the purchase of your second property. Once that grows in value you can invest again and so on, using the same formula.

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