If one rental property generates a positive cash flow, why not get another property to double the income? This is the idea behind stretching your property portfolio to its full potential. After all, having multiple properties is the end goal.

Property investors have both short- and long-term plans. And if you are just starting out, you are free to set whatever number of properties you want to be in your investment portfolio. The sky’s the limit, as they say. 

But the gruelling process is not a phase you can skip. You will be planning. A lot. You will be reading reports and analysing markets. Your first purchase is going to be overwhelming. Your second one is not going to be different. 

The money side of it all is going to be the most challenging. More than the plans and the reports, you need to think of how to finance your dream of having multiple properties. But let’s be clear on one thing: it’s only difficult, not impossible. 

As long as you have a good financial history with your first loans and you can prove that these investments are doing well, the process is going to get easier as you go from your third to your fourth property and so on. 

How do you expand your property portfolio fast?

Investment strategies differ from person to person. You can wait until you fully pay your first mortgage before you move on to another property and take out a mortgage.

Sure, there are advantages to doing that. One, without any loan under your name and with one property that you fully own, a lender will not consider you high-risk. 

However, the more time you spend waiting to finish off one loan means the more time you miss out on possibly enjoying a bigger income down the road. After all, how long is the loan term on that first mortgage? 

If the above is your strategy you might want to reconsider. 

Save enough for a deposit

You will need a deposit to get a loan on your first property. You must have at least 20% of the property value. Given that properties are not cheap, it may take you a few years to save up for just the deposit. Of course, that will depend on your financial habits. 

How short you fill up your coin bank will depend on how you can adjust your spending. If you must start a side hustle to make the process even faster, do so. 

You can also opt to pay LMI or lender’s mortgage insurance if you can’t reach the required deposit. If the high deposit is what’s stopping you from entering the property market now, this is an option. Although, you have to weigh the pros and cons properly. The LMI can easily be up to a few thousand dollars. 

Take out your first loan

Once you have enough money for the deposit, you can now take out your first loan. 

Build equity 

Once you start paying off your monthly mortgage, the building of equity starts, too. Once your equity has grown big enough to cover the 20% deposit on another property, you can use that to get another mortgage.

The cycle only repeats from hereon. 

Advantages of investing in multiple properties

People invest in properties because of the steady monthly income. Another is that they get tax breaks from owning such investments. Investment properties are also a great way to cushion your finances from the effects of inflation. 

You get all these with just one property.  But you enjoy the advantages twice when you have two investment properties.

Moreover, you don’t have to wait until you pay off your first loan to start acquiring another addition to your portfolio. You get to achieve your desired portfolio sooner. If early retirement is your goal, then it’s totally possible, too. 

Challenges of having multiple properties

As long as you have enough deposit to put down on a property, you can take out as many mortgages as you want. While this is true, it’s also an oversimplification. The lenders will still look at your financial situation. 

You have to make sure that you are not overextending yourself by taking out so much more debt than what you can service comfortably. 

Of course, an applicant with zero debt is much more attractive to lenders than one with two ongoing mortgages. However, the approval of a third loan will depend on how you can successfully convey to the lender that your investments can cover all the mortgage repayments even with the third one added. 

Thinking of taking this route? Our home loan experts can answer all the questions you may have about securing a loan. If you are ready to get this plan rolling, let’s hop on a call and discuss your options.