How to Balance an Investment Property Portfolio in Australia

A property portfolio can take more time to manage than a single high-value property. Yet, there are many advantages despite the risks to aim for a property portfolio to Get Rich and Retire Early.

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. Our property sequencing guide explains how growth-phase properties fit into the broader acquisition order; timing matters as much as asset selection.

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. Learn about the common myths of Rental Yield and Capital Growth, and how they will come into play with your own property portfolio.

Negative Gearing vs Positive Gearing: Which Strategy Suits Your Portfolio?

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. Our guide to charting the course to financial freedom through property covers how the Secure phase connects to long-term retirement goals.
  

Building an investment property portfolio requires knowledge and commitment over the long term. You can also see how portfolio rebalancing has played out for real investors in our results section: several case studies describe the pivot from growth-phase to protection-phase decisions.

If you're unsure whether your current portfolio is balanced correctly for your stage, a strategy call is the right starting point for an independent assessment. Plan carefully and do not hesitate to leverage the professional help of the experts who have built their strategically balanced portfolios successfully.