What is a property portfolio and what are the benefits of building a property portfolio for yourself?
A property portfolio is a collection of property investments owned by an individual, a group or a company. There are many benefits to owning a property portfolio as opposed to either owning no properties or owning just one investment property.
It Is Hard To Achieve Financial Freedom From Just One Property
The first benefit is that it’s very hard to achieve financial freedom on just one investment property even though only one investment property is a great step and makes you less reliant on the pension or less reliant on your super.
Purchasing just one property is unlikely to allow you to achieve that real financial freedom that you want, whether that be early retirement or whether that be significant amounts of wealth. However, owning multiple investment properties with multiple rental incomes and multiple opportunities for growth can really set you up financially.
You Can Diversify Your Property Portfolio To Grow Faster
Another great thing about having a property portfolio is the ability to diversify in order to grow your portfolio faster. If you invest in just one property or even if you invest in two or three properties in the same area and that area doesn’t grow for five years, well then, you don’t have any equity to go ahead and invest in more properties.
But if you have three different properties all scattered throughout different areas even if two of those areas don’t grow, but one of them does, it’s likely that you’ll be able to access equity from that property that grows and will be able to buy a fourth property and you can then continue to grow your property portfolio faster.
So having all of your eggs in one basket, all the properties in one area can limit how fast you get back growth.
You Gain Access To More Equity
Another major benefit of having a property portfolio is access to equity. When properties go up in value, there is often the opportunity to borrow against that increased value, to either reinvest into more properties or even in some cases to fund your lifestyle.
Multiple Rent Increases Increasing Profitability
Over time, rents tend to go up, so another benefit over property portfolio is the fact that you have multiple properties with multiple rents going up. Your major expense which is your mortgage tends to stay about the same apart from fluctuating interest rates.
But as rental income goes up that means you got more income while your major expense your mortgage stays relatively the same. This leads to more passive income for you, and the more properties you have well the more potential passive income there is.
A Property Portfolio Gives You Multiple Streams Of Income
And the last benefit that I am going to share with you today is a property portfolio gives you multiple streams of income. If you own just one investment property and it’s not tenanted then you are getting absolutely zero rental income, because no one is renting it.
But if you have five properties or ten properties and just one of them isn’t rented, but the rest are, well you still got cash flow coming in.
So by diversifying and by having multiple properties means that you get the benefits of multiple rent increases and you also get the cash flow benefits of the fact that when one property is vacant, you still have cash flow coming in.
As you can see, there are a lot of different benefits to our property portfolio.
I hope that this has explained exactly what it is and the benefits of it and has encouraged you to consider building a property portfolio of your own.