What is a property portfolio?

A collection of property investments held by a person, a group or an entity. One investment property is a start; a portfolio is several, chosen and sequenced so that the income, growth and risk of each fit together rather than standing alone.

Why build more than one investment property?

Because one property rarely delivers the outcome most investors want. With several properties in different markets, growth in one can release equity for the next, income from several softens a vacancy in one, and later on part of the portfolio can be sold to pay down the debt on the rest. The sequencing guide sets out the method. General information only. We're licensed buyer's agents, not financial or tax advisers, so please check anything that affects your money with your own adviser.

How does diversification help a property portfolio?

Markets move in their own cycles. Three properties in one suburb rise and stall together; three in different regions are more likely to have at least one growing at any time, which is what allows equity to be released for the next purchase. Diversification across markets also spreads vacancy and cash flow risk.

What does deleveraging mean and when does it happen?

In the accumulation stage investors add debt with each purchase. Later, some properties are sold and the proceeds reduce the debt on the rest, leaving a smaller, lower-debt portfolio producing income. That step is only possible with more than one property, because you cannot sell a fraction of a single house. General information only. We're licensed buyer's agents, not financial or tax advisers, so please check anything that affects your money with your own adviser.

In what order should properties be bought?

The order that keeps the next purchase possible. Each acquisition should improve borrowing capacity, cash flow and buffers for the one after it, or at least not damage them. That is why we start with the client's position and the role the next property must play, not with a suburb.

How does Get RARE help build a portfolio?

Strategy first: what the portfolio has to achieve and what it can support. Then independent acquisition of each property to a written brief, and annual review so the sequence stays right as circumstances change. We are paid only by the client and never by a developer or seller. General information only. We're licensed buyer's agents, not financial or tax advisers, so please check anything that affects your money with your own adviser.

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How to build a property portfolio in Australia: the sequence that works

Benefits of Building a Property Portfolio for Retirement

Is remote property investing a good idea? There are opportunities beyond the bright lights of the city.

A property portfolio is a collection of property investments owned by an individual, a group or a company. A lot of us aspire to own multiple investment properties; not necessarily an easy goal to achieve. There are many advantages to holding a property portfolio as opposed to either owning no properties or possessing just one investment property. Let's look at the advantages.

Benefit #1: Build Wealth and Retire Earlier Than Your Peers

Though buying one investment property is a great start and might make you less reliant on your pension, but it is tough to achieve financial freedom on the back of just one investment property. Purchasing only one property is unpromising to allow you to accomplish that real financial freedom that you desire, whether that be early retirement or whether that be significant amounts of wealth. Before you add another, it is worth knowing how many investment properties you need to retire on your own figures.

However, owning many investment properties with multiple rental incomes and numerous opportunities for growth can be beneficial in helping you achieve financial freedom. Our portfolio strategy and sequencing guide provides the specific framework for this discipline, including when to buy, when to wait, and how to sequence acquisitions deliberately.

Benefit #2: Diversify Across Markets to Reduce Concentration Risk

A property portfolio allows you to add diversification which will enable you to grow the portfolio faster. For example, if you buy in just one property or even two or three in the same neighbourhood, then your portfolio growth is so dependent on the growth trajectory (defined by property cycle) of the area. If that area stays stagnant for a few years, then you are not getting the equity growth you need to proceed in property reinvesting.

However, had you scattered those three properties throughout different regions, then it is likely that at least one property grows in value and allow you to access equity, enabling you to acquire your fourth property quicker. Thus, diversification will allow you to build wealth faster.

Point to note is that Australian real estate is not a homogenous market and every area has its own property cycle. So one area may be going down in value, but another area might be going up in value.

Benefit #3: You Also Diversify Your Risk

Property investing is not risk-free, and we need to embrace the risks to Get Rich and Retire Early. There are numerous risks associated with property investing, two being the risks of vacancy and cash flow.

Possessing a portfolio helps you manage these risks better. For example, if you own only one property, and that happens to be vacant. This implies 100% vacancy for you, meaning zero rent will be collected over the period.

However, if you had ten properties in your portfolio, and one property becoming vacant will imply only a 10% vacancy rate. Paying off the expenses related to the vacant property would be relatively more comfortable when you have the luxury of rent-collection from the other nine properties rather than just owning one and not getting any income for it.

(For embracing other risks associated with property investing refer the quick guide available here.)

Benefit #4: Opportunity to Deleverage

A debt-free portfolio earning a steady rent stream is the end goal for someone aiming to Get Rich and Retire Early. Typically, in the accumulation stage, investors buy properties adding to their debt levels. At a later stage, investors would have to sell a few properties, access equity and pay down their overall debt. Deleveraging, an essential step, will lead them to hold a smaller but mortgage-free portfolio. Our guide to charting the course to financial freedom through property shows exactly what this trajectory looks like across a 15-year portfolio journey.

If you own only one property, you can't liquidate a fraction of it to follow this approach. However, if you own multiple properties, you can very well sell a few, pay down debt and yet have several properties in your possession to generate passive income for you, getting you Rich and Retire Early.

Our retirement gap calculator shows how your current portfolio position maps to long-term financial freedom, useful context for understanding what 'enough' looks like.

Next steps: Should you want to learn how the author built his $5m balanced portfolio in 7 years and aspire to own something similar, feel free to get in touch via email at [email protected] or book an appointment here.

Disclaimer: This article is general in nature and does not take into account your situation. You should consider whether the information is appropriate to your needs, and where applicable, seek professional advice from a financial adviser.

About the author

Rasti Vaibhav is the founder of Get RARE Properties, an independent buyer's agency for property investors. He is a CFA Charterholder and spent more than nine years managing institutional portfolios at Westpac and AMP Capital before founding the firm in 2020. He sits on the REINSW Buyers' Agent Chapter Committee and is the author of The Property Wealth Blueprint.

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