Building an expansive property portfolio is a dream few investors achieve. However, owning multiple investment properties could be the key to achieving financial freedom, if you choose your investments wisely.

How to build a large property portfolio

According to data released by CoreLogic in June 2016, there were 2.03 million individual investors in the country, implying most property investors owned only one rental property, with an average of 1.28 investment properties per investor. Yet, we hear stories of people who have successfully bought three or more investment properties, simply through smart financial planning and timely action. So, what is it that sets apart these property barons from the others?

Well, according to experts, buying your first investment property is the hardest. However, once you make that first purchase, the journey becomes easier.

The first and most important tip for a property investor is to be aware of the happenings in the property market. By understanding the property clock or reviewing the historical performance of an area, it is possible to buy a property in an area that has hit bottom and is currently recovering. If you buy in a market that is at its peak, it could probably be years before the property is worth what you have paid for it.

Another folly that investors make is relying on negative gearing as an investment strategy. Negative gearing helps you minimise your losses by offsetting them against your taxable income. However, your asset remains a loss-making asset. On the other hand, by having positive cash flow properties, you are free to invest the extra cash in expanding your property portfolio.

Third, and most importantly, finding the right financing is crucial to building your portfolio. The home loans that you choose to fund each of your properties are closely tied to the success or failure of your investment strategy. Experts say that by choosing your lenders carefully, you can increase your borrowing capacity to a great extent. Thus, investors who envisage an extensive property portfolio must enter the market with a long-term approach from the start.

Here’s why:

According to Michael, a HashChing mortgage broker, “The correct lending structure is critical to ongoing investment, as is finding the right property to match your requirements.”

As you already know, each lender has unique lending criteria and risk tolerance. Thus, different banks may assess your home loan application differently. Thus, with the same income and assets, Bank A might decide to lend you a modest $300,000 while Bank B might agree to lend you $400,000. A more generous Bank C might even choose to lend you some more, say, $450,000.

It is quite clear from the above example that your choice of lenders will affect your borrowing capacity substantially. As a property investor, you can use this fact to your advantage by diversifying your borrowings across multiple lenders. However, merely choosing loans from various lenders is not enough. Of course, it is wise not to cross-collateralise, but selecting the right lender at the right time is the key to borrowing more for your investment.

Kelvin, a HashChing mortgage broker, explains: “For investors with multiple properties, we look to secure maximum equity from mainstream lenders, removing any cross-collateralisation, and then lending from specialist lenders because they ‘assess’ other loans at interest only rates with 0%-30% on repayments – rather than 7.25-8% as most lenders.”

To understand this better, let’s go back to the example above, where, it is natural that you’d be tempted to deal with Bank C. But, if you aim to buy more properties in the future, Bank A is your best bet to start with. The logic is simple. You start borrowing from banks with stricter lending criteria, moving on to banks with less restrictive rules as your debt (and portfolio) grows.

A mortgage broker can help!

Hitting the serviceability wall is the most significant hurdle faced by investors building a large property portfolio. However, a mortgage broker who specialises in investment lending could help you avoid this block by making a higher number of investment loans available to you as your property portfolio grows.

At HashChing, we have created a network of ace mortgage brokers from across Australia that you can browse here. You can also post your queries online to find yourself a specialist investment mortgage broker to help you get ahead on your journey.

HashChing is Australia’s first online mortgage marketplace that allows users to compare broker-negotiated mortgage rates from over 60 lenders across Australia. Users can also post their home loan queries online to have them resolved by experts in a transparent manner, free of cost.


By Vidhu Bajaj,
HashChing Content Writer



HashChing is helping Australians by providing access to the pre-negotiated home loan deals. Obligation free consultation with one of our partner brokers might save you time, hassle and money.

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