BUILDING A PROPERTY PORTFOLIO

Just like anything new, kicking off an investment portfolio can be terrifying. However, with the right strategy and conscientious research comes confidence; and with confidence anything is achievable. But where does a first-time property investor start?

Jo Chivers, director of Property Bloom, says there are two lessons she learned near the beginning of her investing career, both of which have created her investment strategy ever since. First, investing in property is a long-term strategy.

“When you take into contemplation the high purchase costs such as stamp duty, legal and loan costs, then you really need to be holding for over five years, depending on where we are in the property cycle. My strategy now is to hold property long term, or at least 10 years to advantage from an entire property cycle,” she says.

Secondly, since buying her first investment property in 2000, Chivers has read innumerable books and magazine articles and completed an intensive property investment course, educating herself to become more financially knowledgeable and understand all the strategies that can be used when investing in property. “I recommend first-time investors educate themselves before purchasing,” she advises.

Part of this education is being clear on what you are trying to achieve. Pino Tedesco, the director of Capital Property Advisory, says that without a plan it’s almost impossible to get to the goals you’re trying to attain. “Different investors have diverse goals and different constraints. Those will govern what sort of structures you put in place, or finance strategies you may employ. Once you put your plan together you should be able to see yourself reaching your short, medium and long-term goals,” he says.

An initial strategy should be treated like a blueprint for all future investments. It can also offer certain steps that must be considered for each investment. Tedesco outlines the key questions to ask:

•  How do I constitute my investment?
•  Do I acquire my own name?
• Do I purchase in a trust?
• Do I use my super or ask parents to assist with a deposit?
• In regards to finance, which products do I utilize?
• Which banks?
• Before I buy, if renovating is part of my strategy, what are the costs in doing so?

Taking into contemplation the goals and constraints of the investor, a risk profile should also be developed. This will weigh the pros and cons of various ways of investing. “Some people buy and hold; some people buy, renovate and hold; some buy, renovate and vend. That could be for existing stock out in the market, or it could be for new stock just built, or possibly even off the plan. Different strategies have dissimilar risks. That’s why it’s very significant in your initial strategy to review your risk profile. Find out which is the most appropriate approach for you,” Tedesco suggests.