How to Build a Large Investment Property Portfolio on an Average Income
Here at Pure Property, we work with property investors every day who have salaries that range across the board. One of the most common concerns we run into with investors on the lower end of the income scale is that they worry about not being able to afford to get into property investing without huge amounts of disposable income. However, this could not be farther from the truth. The fact of the matter is that anyone can get started building an investment property portfolio, even those with only average income.
Do Your Research
When people are first getting started in property investing, we often see them trying to choose properties based on emotional attachments rather than on financial projections. This is perfectly fine if you are shopping for your personal home, but it can be hugely detrimental when shopping for investment properties. Instead of choosing a property because you fell in love with the beautiful glass front door, you need to look at properties from an investment perspective. They may not be as beautiful as a home you would buy for yourself, nor may they be in an area which you are familiar with, but if the home is functional and in a good location, and in the correct part of the property cycle, it can be incredibly lucrative as an investment property.
Obtain a Mortgage
Another common mistake we often see in investors with average income is thinking that they need to save up a massive deposit to purchase a property. In actuality, you can qualify for a mortgage with very little money upfront. Keep in mind that your tenants will be paying you monthly rent, which you can then use to pay your mortgage. Many mortgage agreements will even let you make interest-only repayments on investment properties. This can help to keep your expenses down while you are seeking out tenants.
Use Your Equity
If you have equity built up in your personal home, you can borrow against that equity to purchase your first investment property. Then, once you have built some equity in that property, you can borrow against it to purchase additional properties. This way, you can start building your property portfolio without having to even touch your salary regardless of your income levels. As you bring down the mortgages on your existing properties, you’ll have even more equity to work with for buying future properties. Once some of your properties are completely paid off, the rental income they generate will give you passive income that can someday support you in retirement.
The biggest mistake we see new property investors makings is assuming barriers for entering the investment the property market which much of the time don’t exist. The longer you wait, the more rental income you are missing out on and the longer it will take you to build up your property portfolio. Start a discussion with industry professionals (Buyers Agents, Mortgage Brokers, Accountants) who have a track record of structuring investment property portfolios for investors with average incomes.
Income is typically not the barrier, it’s the individual.
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