Tips for Extending Your Investment Property Portfolio

Tips for Extending Your Investment Property Portfolio

An investment property portfolio is a collection of different investment assets that one holds and manages to achieve a financial goal.

It is considered a compilation of assets and property investments that include rental properties, rehabs, and Real Estate Investment Trusts.

The timeline and earnings of an investment property portfolio depend on the holder’s objectives, time horizon, and risk tolerance. This means that if you are planning on establishing or extending your investment property portfolio, you need to consider the expected number of years you intend to invest and the risk versus reward approach you plan to take to obtain your goal. Simply put, your portfolio will show your achievements in investment.

The benefits of having an investment property portfolio
There are several benefits to starting an investment property portfolio. Some such benefits include:
predictable cash flow
tax advantages
diversification
leverage to build wealth

A predictable cash flow is one of the key benefits of establishing an investment property portfolio. The cash flow refers to the net income from a real estate investment after you’ve made the mortgage payments and deducted the operating expenses. What’s better is how cash flow only strengthens over time as you pay the mortgage and build up your equity.

People with an investment property portfolio can also take advantage of tax breaks and deductions. This saves significant money during the tax season. How may you ask? Simple- you can deduct the costs of owning, operating, and managing a real estate property.

The third benefit of an investment property portfolio is its diversification potential. Real estate has a low to non-existent correlation with other major assets. This allows the addition of real estate to lower portfolio volatility while providing a higher return on every risk.

Finally, there’s leverage. Leverage refers to the use of debt to increase investments return. An example of this is how a 10% down payment gets 100% of the investment property. Since real estate is a tangible asset that can serve as collateral, this means easily available financing.

When is the right time to extend your investment property portfolio?
If you are thinking of extending your investment property portfolio, you will have to recognize the right time. Timing is everything, especially in real estate. You have to check out the position of the housing market, for one. You also need to take into account the different responses to different variables.

Nowadays, most buyers seek open gardens and huge spaces for home offices because of the WFH (Work from home) setups. If you have a property with these potentials, it may be time to improve this marketable and trendy asset.

Use the equity in your investment property for the next one
One way to extend your investment property portfolio is to use the equity in one of your properties to fund the deposit in the next place. Equity refers to the value of your home, less what you owe on your mortgage.

First, though, you’ll have to get your property valued so you will know the equity you have, as well as reveal how much you may be able to borrow against that property to buy another one.

Secondly, ensure the rental income is positive to help reduce the overall debt.

Thirdly, maximise the tax benefits on your investment property. This will help with the cash flow and debt reduction.

Of course, you’ll also need to make sure that your home makes a sound investment choice. This means checking out potential rental returns, future capital gains, and tenant demand.

Speak with your investment property specialist at Mirren Investment Properties. We can help you understand the best options for your current finance situation and objectives.