The 5 Things You Need To Know To Build Your Own Positively Geared Property Portfolio!

The 5 Things You Need To Know To Build Your Own Positively Geared Property Portfolio!

Want to convert your negatively geared property portfolio into a positively geared property portfolio?

Want to add value to your exsisting property portfolio and use the equity to buy more properties faster?

We’ve got you covered with the 5 things you need to know to build your own positively geared property portfolio.

Looking to buy an investment property in the next 12 months? Learn more about how we can help you here…

1. Review your existing property portfolio

It’s important to periodically review your property portfolio to make sure it’s:

  • Performing
  • Helping you to achieve our goals
  • Helping you to achieve financial independence

It’s important to systematically weigh up the pros and cons of each property in your portfolio.

You can do this by asking yourself the following questions:

  • Is my portfolio helping me to achieve my goals?
  • Is my portfolio balanced?
  • Am I getting the returns I desire?
  • Have I maximised my rental yield?
  • Can I manufacture additional capital gains?
  • Are my properties owned in the right structure?
  • Do I have the most competitive interest rate?
  • Do I have property managers who are looking out for my best interests and do I have the right tenants in place?
  • Are there any properties in my portfolio that are holding me back?
  • Should I continue to hold the properties in my portfolio?

If there are properties in your portfolio that are holding you back you may need to make the decision and sell.

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2. Add value to your existing property portfolio

As an investor its important to make sure your portfolio is performing from both a capital gains and a cash flow perspective.

As investors we have the potential to manufacture a capital gain into a property by:

1. Adding extra bedrooms

2. Adding extra bathrooms

3. Undertaking a basic comedic renovation:

  • Painting inside
  • Polishing floors
  • Installing new carpet
  • Installing a range hood
  • Installing a new dishwasher
  • Cleaning up the existing bathrooms
  • Painting over existing tiles
  • Painting over cupboards
  • Installing a bathtub
  • Installing an air-conditioning unit
  • Installing ceiling fans
  • Installing heating
  • Installing blinds
  • Installing built in robes
  • Installing laundry taps
  • Installing new door handles
  • Installing a new mailbox
  • Installing a new front door
  • Providing some basic landscaping
  • Installing a clothesline

Read more here: Simple and effective design tips guaranteed to increase the value of your home.

4. Undertaking a more substantial renovation:

  • Paint the outside of the outside
  • Re-do the roof
  • Build a new deck
  • Create an entertaining area
  • Open up a floor plan
  • Install a carport

Read more here: Design tips for your investment property.

.Ben Everingham's 3rd Investment Property - Before

Ben Everingham's 3rd Investment Property - After

Read more about Ben Everingham, the director of Pumped on Property’s personal property portfolio here.

As investors we also have the ability to increase our cash flow by doing the following:

  1. Decreasing our expenses
  2. Increasing our rental income
  3. Decreasing the vacancy period
  4. Increasing the rent
  5. Decreasing the rent – The lost rent from a few extra weeks of vacancy can outweigh any gains you’d make by charging a higher rental.
  6. Switching to an interest-only loan
  7. Refinancing to a lower interest rate – it’s worth speaking to a mortgage broker to see if you’d be better off refinancing at a lower interest rate with a different lender
  8. Buy a low-maintenance property
  9. Self-managing your investment
  10. Maximising tax deductions
  11. Preparing a depreciation schedule
  12. Renting out a furnished property
  13. Leasing by the room
  14. Making the property attractive to students
  15. Adding extra bedrooms
  16. Leasing whitegoods to tenants
  17. Undertaking a basic comedic renovation
  18. Undertaking a more substantial renovation

Australian Property Investor has put together a fantastic report titled 50 Ways To Increase Your Rental Yield.

This report goes into each of the points above in more detail and is well worth a read if your goal is to increase your cash flow.

3. Buy well

Warren Buffett was quotes saying ‘an investor makes their real money they buy’.

Buying well is fundamental to growing a positively geared property portfolio.

You can buy well by incorporating the following ideas into your investment strategy:

1. Buy at the right price 

Investors generally buy property for one of three reasons:

  • Capital gains
  • Cash flow
  • A combination of the two 

Before you begin your search it’s important to identify the reason for your purchase.

The search criteria you use to achieve a capital gain will be significantly different to the criteria you use to find a positively geared property.

Once you have identified your strategy it’s imperative you buy at the right price.

Please see how to find positively geared properties online for more information on buying well.

2. Cash flow is king

To build a positively geared property portfolio it’s important to purchase properties, which produce cash flow or have the potential to be modified to create cash flow.

Not only does cash flow allow you to maintain your mortgage repayments, but allows you to create surplus income to:

  • Repay debt
  • Re-invest
  • Create a better lifestyle for you and your family
  • Take control of your live
  • Achieve your goals
  • Reduce your dependence on your job
  • Achieve financial independence
  • Create a more secure future

Learn how to easily identify positively geared and cash flow positive properties here.

3. Understand the market 

The key to buying well is to understand the market in precise detail.

To gain a deep understanding of the market you can:

Search online

Please see how to find positively geared properties online for more information on buying online.

  • Realestate.com
  • On The House
  • HTW Report
  • Residex
  • RP Data
  • Magazines
  • Blogs

Talk to locals

  • Real estate agents
  • Developers
  • Builders
  • Local residence

Talk to investors

4. Take a long-term view

It’s important to take a long-term view when selecting property.

The following questions are important to ask before purchasing any property:

  • Does this property have potential for growth?
  • Does the local area or shire have potential for growth?
  • Does the local or state government have any key infrastructure plans for this community?
  • Will this property stand the test of time?
  • Is this property desirable to the current and future demographic in this community?
  • Is there potential to add additional value and cash flow to the property in the short, medium and longer term?

5. Search for off market properties 

The best properties are often purchased before they hit the market.

Try to target properties before they are advertised and hit the market by:

  • Regularly making contact with local agents to ask them about new opportunities
  • Using an experienced buyer’s agent with well-developed relationships in the real estate industry and a pipeline of ‘off market’ opportunities
  • Door knocking and sending letters. Not all vendors will want to pay agents thousands of dollars for advertising and commissions. Start pounding the pavements and make as many contacts as you can – it’s a numbers game

6. Keep an eye out for un-renovated properties 

Targeting un-renovated properties may allow you to reduce your competition as a buyer.

Un-renovated properties may also provide the opportunity to manufacture a capital gain and increase your cash flow.

8. Look out for mortgagee properties 

When people are forced to sell, due to a death or mortgagee sale, the property can often sell for less than it would under normal circumstances.

Many seasoned investors and buyers’ agents will target these under valued properties as part of their investment strategy.

Remember just because something’s cheap doesn’t always mean it represents good value.

9. Buy with the potential value of the property in mind

Many first time investors focus their attention and time looking for the cheapest property in the market.

While buying under market value is a great strategy, buying a property, which has the potential to add value, is a far better strategy over the long term.

Examples of properties, which may have untapped value:

  • A piece of land with subdivision potential
  • A house on a larger piece of land with subdivision potential
  • A house with a granny flat
  • A dual occupancy
  • A 3-bedroom and 1-bathroom house, which has the potential to be renovated into a 4-bedroom, 2-bathroom house
  • A single story home, which has the potential to be renovated into a 4 double story house
  • A house close to a university, where you have the ability to rent out each room separately

As you can see from the examples above this strategy relies on buying properties with the potential to add value and cash flow.

10. Negotiate well

Negotiation is one of the most over looked and undervalued skills amongst property investors.

Negotiation is where the money’s made and where the deal’s won or lost.

Try and keep these simple negotiation strategies top of mind next time your in the market:

1. Make the first offer. 

2. Have a property to trade in.

Having a property to ‘trade in’ may help you move into a more favourable position in the negotiation process. Nothing gets a real estate agent more excited than knowing they may be able to list another property while selling the one they have.

3. Make multiple offers on a number of properties to help take the emotion out of your decision.

4. Knowledge is power when it comes to negotiation. Find out as much as you can about the vendor’s position to obtain real insight into whether the property is worth bargaining for.

Ask questions such as:

  • Why is the vendor selling?
  • Have they purchased another property?
  • What settlement terms would be most preferred?
  • How long have they owned the property?
  • Was it an investment or owner-occupied property?
  • Is it tenanted?
  • Have they had any offers?
  • How long has the property been on the market?
  • Are the vendors just testing the market or are they ready to sell?

5. Use syndicate purchases to leverage buying power.

4. Add value to your new property

Please see point 2 above – add value to your existing property portfolio.

Ben Everingham's 3rd Investment Property - Before

Ben Everingham's 3rd Investment Property - After

5. Re-invest your profits

Once you’ve:

1. Reviewed your existing property portfolio

2. Added value to your existing property portfolio

3. Bought well

4. Added value to your new property

Its time to re-invest your profits.

This can be done by re-investing any excess:

  • Cash flow from your properties
  • Cash flow your income or business
  • Chucks of cash your receive (such as tax returns, bonuses, sales commissions, inheritances, etc)

Many investors will also re-invest any equity or capital gains they make during the accumulation stage to help them reach their goals faster.

By re-investing your profits you set your self up to: 

  • Create a better lifestyle for you and your family
  • Take control of your life
  • Achieve your goals
  • Reduce your dependence on your job
  • Achieve financial independence
  • Create a more secure future

Would you like articles like this delivered straight to your email each month? Sign up to Pumped on Property’s free monthly newsletter today.

The information contained in this blog is for informational purposes only. No responsibility can be taken for any results or outcomes resulting from the use of this material. While every attempt has been made to provide information that is both accurate and effective, the author does not assume any responsibility for the accuracy or use/misuse of this information.

I am not a lawyer, accountant or financial planner. Any legal or financial advice that I give is my opinion based on my own experience. You should always seek the advice of a professional before acting on something that I have published or recommended.

Ben Everingham

About

Ben founded Pumped On Property after building a multi-million dollar property portfolio over a 5 year period. His mission is to show you how to replace your income through property investing so you can do what you love…full time.