Updated: Jan 13
To succeed in property investing by maximising your returns and minimising the risks, a delicate balance in your property balance is critical.
Note: The idea of a perfect portfolio is highly subjective. It depends on your risk appetite, aspirations, personal and financial goals. So what has worked for others might not work for you.
Rental Yield vs Capital Growth
The typical aim of the investors is to build a portfolio that not only pays for itself but also grows consistently in value. Hence, it is essential to have both types of properties: some that will deliver high rental yields and some that promises high capital appreciation. It will be ideal to find a property that offers both attributes, but they are very hard to find without taking undue risk.
Negative vs Positive Geared
When the rental income is higher than the outgoings associated with the investment property, it is referred to as positively-geared; when it is less, it is said to be negatively-geared.
People typically get into property investment to set up an income stream that steadily flows into their bank account passively.
Positive cash flow property is self-sustaining as it puts money in your pocket, and is typically preferred. On the other hand, the negative cash flow property has its benefits as current legislation allows investors to deduct losses incurred on an investment property against their taxable income. Moreover, a relatively higher capital growth rate is expected of them.
Though the preference should be to have a positively geared portfolio, it is okay to have a few negatively geared properties in your portfolio to chase capital growth.
Tips for building a balanced property portfolio
Have a personal investment strategy and plan. A perfect portfolio, personalised for your circumstances, will serve as a blueprint for you. Who fails to plan, plans to fail.
Have a purpose for buying a particular property. Don’t merely purchase property for the sake of purchasing it. It would be best if you strategically acquire assets to serve a purpose defined by your investment strategy.
Acquire only those properties that can serve you for the long-term.
Building an investment property portfolio requires knowledge and commitment over the long term. Plan carefully and do not hesitate to leverage the professional help of the experts who have built their strategically balanced portfolios successfully.
Next steps: Should you want to learn how the author built his $5m balanced portfolio in 7 years, and aspire to own something similar, feel free to get in touch via email at firstname.lastname@example.org or book an appointment here.
Disclaimer: This article is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where applicable, seek professional advice from a financial adviser.