Property investors who are new to investing often wonder how those property investors who have been around a while grow their investment portfolios so fast. Stories are always appearing about people who own a large number of properties and investors with one or two wonder how on earth that can come about.
It really isn’t any different than the very first step of using equity in an existing property for the deposit on another. How investors can rapidly grow their portfolio is by the fact that they have a number of investment properties to work with.
How it works.
Say for example, you have substantial equity in your current home and start your investing using the equity in the home to purchase your first investment asset. As your home and your investment property increase in value, you will have enough equity to purchase your third investment, but gained from two properties. As the number of properties owned increases, the quicker you build equity and therefore the quicker you can purchase multiple real estate assets.
1 property @ $300,000 X 10% = $30,000
4 properties @ $300,000 = $1,200,000 X 10% = $120,000
6 properties @ $300,000 = $1,800,000 X 10% = $180,000
It was not so long ago that real estate was increasing at over 10% a year.
You can see how property equity increases dramatically with a multiple number of properties and how equity quickly accumulates to purchase the next one. This is the strategy that investors use to grow their investment portfolios so quickly. You often read about people who have over 20 properties and this is the strategy that is used. Investors don’t get into that situation over night and it does take time to build a strong portfolio from their initial investment, but once there are a few properties in the portfolio it can explode overnight given the right circumstances.
Of course there are a lot of other considerations too with loans and repayments that need to be taken into account.
Should a property investor intend to live off the proceeds of his investments, then a property investment strategy needs to be put in place to cover that. It could mean that an investor will put a hold on buying for a bit and manipulate the portfolio into a positive situation or the investor may sell a property or two to decrease the loan repayments.
Good times usually follow bad times and it is expected that the property market will recover over the next few years. Loan monies may be harder to get for multiple properties but all these factors can be addressed as a property investment portfolio is grown. Keep aware of what is happening in the property market and in the finance world so that you are ready to reap the rewards when the time is right.