Your Domain: What to consider before expanding your property investment portfolio

Whether you’re starting from scratch, or expanding your portfolio, purchasing an investment property is a daunting process.

Melbourne resident Natasha bought her first investment property at the age 22. Since then, she and her husband have gone on to purchase three more properties – all before the age of 30.

“I started my part-time job during high school and then continued that through university,” she told Your Domain. “As my income increased, I was very conscious of the fact that I didn’t want to increase my living standards either.”

After saving and living frugally, her first purchase was a house in Hamlyn Heights a suburb of Geelong, for $310,000. The location was selected after following the advice of a buyer’s advocate

“We were introduced to a buyer’s advocate to help us locate a property so we could focus on buying a property purely based on an investment criteria, rather than an emotional criteria,” she said.

In 2019 they sold their first investment for $490,000 – making $180,000 more than they purchased for.

A year later, her and her husband bought an apartment in Sydney, later using equity to buy two more properties in Brisbane. She has no regrets about expanding her portfolio so rapidly and at a young age, but is realistic that sacrifices had to be made.

“It’s been a very interesting journey managing the fact we have lots of debt, tenants moving out at different times, the occasional repairs coming up.

“It definitely hasn’t been easy and we’ve had to make some sacrifices as well.”

Like Rebecca did, diversifying the property type and location you invest in can help scatter your opportunities, and means you avoid putting all your eggs in one basket.

“You could have five properties across Australia. You can have different styles of properties. So there’s certainly the ability to have diversification in one asset class,” says Sam Gawenda, senior financial planner and director at Rising Tide Financial Services.

Gawenda warns that if you’re young and looking to purchase an investment property, the commitment is larger than you might expect. Being realistic about what your lifestyle expenses will be like in the next five to 10 years is critical.

“What’s really important is what they’ve got coming up in their life in the foreseeable future. If you’re going to be committing to a $600,000 property with a $500,000 mortgage, that comes with a large commitment.”

Rebecca was happy to make these compromises, particularly in setting up security blanket funds for each of her investment properties just in case something went awry.

“I want to make sure there’s always going to be buffers. You don’t often factor in that a hot water system will blow up. So you need a couple of thousands of dollars [saved] for every single property at the same time,” she said.

Her most important piece of advice is to surround yourself with advice and give yourself as much time as possible.

“Start young because time is everyone’s biggest asset,

“Surround yourself with professionals and take advice.”

Your Domain airs at 10am on Saturdays on Nine. Catch up on all episodes on 9Now.