Anthony Keane* says property investment is a popular pastime for Australians, but if you want it to grow your riches you need to treat it as a business.
Real estate investors who stop at one property will have a tough time trying to achieve their financial dreams, specialists say.
The latest Australian Taxation Office (ATO) data shows 71 per cent of the nation’s 2.15 million landlords have just one property.
Nineteen per cent have two properties, 6 per cent have three and less than 1 per cent — about 20,000 people — have more than six.
Metropole Property Strategists CEO, Michael Yardney said investors who wanted an extensive portfolio should treat it as a business rather than a hobby, and needed a business plan and finance strategy.
“To obtain financial freedom, an investor would need to own their own home debt-free plus have the rental income from a number of investment properties — three or more,” Yardney said.
“92 per cent of Australian property investors never get past owning two properties.”
Mr Yardney said factors stopping investors from growing a property portfolio included cash-flow concerns, unrealistic expectations, overconfidence, strategy mistakes and failing to realise there were several different property markets in Australia.
Real estate author, university lecturer and property investor Peter Koulizos said one property could be enough if it was paid off in full, sold at retirement and combined with a healthy superannuation balance.
To live comfortably off rental income without selling properties, retirees would need about $2 million of real estate, he said.
“More than one property means you will live a more comfortable retirement or might be able to retire early,” Mr Koulizos said.
Expanding a real estate portfolio often required buying your first property in the right location — typically close to the city, he said.
“Most people stop at one because the first one they bought didn’t have enough capital growth to increase their equity to buy the second one,” Mr Koulizos said.
“The other reason is they don’t want any more tenant hassles.”
* Anthony Keane is Personal Finance Editor at News Corp Australia. He tweets at @keanemoney.
This article first appeared at www.news.com.au/finance/money.
