By Rohan Taylor –Director of Financial Services at Blackburne Finance & Investments
Headlines are created to sell newspapers and magazines. To do that, they need to appeal to the market in the most provocative and sensational way.
…so that’s why it’s not unusual to see some claim that an investor has made millions in some ridiculously short timeframe. And as the market becomes cluttered with claims, they become more exaggerated to the point that I have serious doubts about the validity of many of them.
There’s a common theme though…FAST MONEY!
Or in other words, “get rich quick”. And while buying in high-risk locations might promise some really good short term returns, and therefore the promised results, the long-term prognosis is less rosy.
So today I’m going to lift the lid on how smart investors actually build high performance portfolios fast. But we don’t just want to build wealth fast…
…we want to build it permanently. You don’t want your wealth to suddenly disappear once interest rates pop up, or the mine closes down or the area goes through a slump.
You want your wealth to build steadily and quickly, but not so fast that you’re exposing yourself to financial ruin by taking on too much risk.
So here’s how to do it…
First, you need to invest in an excellent location. This is paramount for two reasons…
1) You want the long term capital growth – this is where you will create your wealth. It’s the core reason that the property investment works. It’s the reason you’ll be able to retire on a healthy portfolio of great properties.
2) Almost all properties in good capital growth locations are negatively geared to start with. You want the property to grow as soon as possible so you can increase the rent to reduce having to dip into your own pocket each week to keep the property.
Next, since you have a great property in a great location, capital growth will inevitably start to kick in. Within the short to medium term, there will be enough growth in the property to hand you a tidy profit. Rather than sell and bank this profit, the smart investor uses it to finance the next property.
And finally, repeat the process.
That’s all there is to it. Buy properties and use the growth they achieve to finance more properties and let your portfolio keep growing. At some point, you’ll move from the accumulation phase of your investing to the cash flow phase (when you start extracting your gains), but initially, it’s all about the growth.
And the two most important things to remember… don’t chase high risk properties. They can jeopardise your entire portfolio and future success, and frankly, it isn’t worth it.
Location is EVERYTHING.
It determines exactly how fast you can grow your portfolio and your wealth.
Get it right (say, by using our dedicated property location research team) and you could be retiring before you thought possible.
Get it wrong, and you could spend the next decade trying to dig your way out of an investment property mess.