How to build a property portfolio from scratch

Fancy yourself with two, three, four or more properties to your name?

With plenty of research, the right strategy and a little luck, you might get there

We take a look at four of the most common property investment styles, and ask the experts what it takes to succeed at each.

The ‘rentvestor’

Rentvesting – buying an investment property, and renting where you want to live – can be a very successful strategy for both first-timers and existing property owners, says Miranda Mitchell, owner of advisory business Positive Property Results.

“They might decide I’m better renting where I want to be, and maybe owning two investment properties instead.”

Mitchell says this tactic will likely help you grow your portfolio faster than if you were to become an owner-occupier. But if you want to expand that portfolio, keep a lid on the rent you’re paying, warns Mitchell.

If you’re eligible for a first home owner’s grant, stick to the rules.

“I have seen a few mistakes where people have gone and rented it out too quickly,” says Mitchell. “They’re sneaky but then they register the formal lease, so of course they (the government) find out about it.”

The landlord

As with any other type of property investing, keep in mind the fundamentals. Research rents, ask local agents about vacancy rates and look for potential “upside” in the area – such as planned freeways or new school developments.

You must also understand the property market cycle, says Mitchell. “Find the area that’s growing at the minute, rather than at the top of the cycle.”

Each capital city peaks at a different time. Mitchell says Sydney is about at the top of the cycle now, with Melbourne on its tail, while in Brisbane prices are just starting to go up.

Of course there are multiple other factors that can lead to success, such as the type of property you buy and whether you focus on capital growth or cash flow.

The renovator/house flipper

This method may promise a quicker gain, but Mitchell warns that large entry and exit costs can make it difficult to turn a quick profit.

“Quite often you’re best to do your renovation, take equity out and go again,” she says.

“(However) if you’re in a rapidly rising market and you’re pretty confident it’s going to keep doing that over the time you’re renovating and selling, it can work quite well.”

Holiday houses may not always be a good investment.

Only spend your money on updates that will give you a good return, advises Matthew Clark, principal at RAMS Home Loans Illawarra. Ask agents what local buyers want.

“Generally things like kitchens, bathrooms and garages add value to a property. Things like swimming pools can sometimes detract from properties,” he says.

If you’ve got the skills, undertaking the renovation can help you cut costs. But Clarke warns you’ll be paying for your own time and the project may drag on, costing you rental income.

The holiday house investor

Buying a holiday home to make money is usually an unwise move, says Clarke.

“Generally over summer the rent is fantastic, you can earn thousands of dollars a week. But over winter, it’s probably not used at all.”

Clarke owns a holiday home but says he bought it purely for lifestyle reasons, not to make money. “I wouldn’t buy a holiday house for an investment – I just think there’s too much risk and volatility in it.”

Mitchell agrees.

“Probably the only time it could work if it’s something you might be looking at living in when you retire (and you buy 10 or 20 years prior),” she says.

However Clarke says there are always exceptions, and some people do well.

Thorough research and advertising the property on multiple platforms will help, as will marketing it for different seasons.