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How To Create A Five-Year Investment Plan (And Why You Need One)


When it comes to performance, preparation is key. The same goes for your property investment goals.

Creating a property investment plan comes down to a few simple things: where you are now, where you want to be and what you need to bridge the gap.

It gives you a clear idea of your investment strategy and breaks it down into simple, actionable steps to achieve it.

It’s not a set-and-forget document — it should be an evolving roadmap tailored to your unique situation.

Short-term changes — such as changing jobs, starting (or expanding) your family, or renovating your house — can impact your financial position. To ensure these don’t derail your long-term goals, setting a five-year property investment plan is a great way to make sure you’re on track.

Where are you now?

  • Know your financial position

If you’re thinking of building a property portfolio, there are several important steps to consider.

The first step is to carefully assess your financial position. Consider how you will fund the deposit and secure a loan.

“Start with quantifying how much of a deposit you’ll need and where your deposit will come from,” says HSBC Australia’s Head of Secured Lending, Rory McCotter.

“Do you have savings to contribute, or can you utilise equity in an existing property?”

If you’re planning to utilise equity, how leveraged is your existing portfolio? Picture: Getty

“Make sure your finances are in order,” Rory adds.

“Are your bills up to date? Do you have any outstanding credit card debit? Have you spoken to your accountant to understand any tax considerations or are there any big life expenses, such as a wedding or a holiday, expected in the coming months that could impact your ability to service the loan?”

  • How much can you afford to invest?

To figure out how much money you can access, speak to your bank to determine your borrowing capacity and options.

Once you’re clear on how much you can play with, consider what your repayments could be, taking into consideration potential interest rate rises or other unforeseen costs.

  • How much income will the property generate?

Buying an investment property is one thing, holding onto it is another.

You’ll need to consider how much income your investment will generate and whether it be positively or negatively geared.

If it’s negatively geared, can you afford to cover the shortfall? What about when you factor in rates, insurance, potential vacancy periods, repairs or other maintenance costs?

“Purchasing a property also involves other costs such as stamp duty, legal fees and inspection costs – which can add up quickly — so make sure you factor these into your budget,” Rory says.

Crunch the numbers and make sure they add up in your favour. Picture: Getty

It’s better to underestimate the rental yield and overestimate the potential out-of-pocket expenses so that you’re not falling short if — and when — unexpected costs arise, Rory suggests.

Where do you want to be in five years’ time?

  • Set short and long-term goals

Life happens — your plan needs to reflect this. Looking at your future financial and lifestyle goals will help to clarify your decisions, Rory says.

For example, if your goal is to double your portfolio over five years but you have just changed jobs or are planning to soon, how will this impact your ability to get an investment loan approved? Does your investment timeline reflect this?

Look at your long-term financial goals, research the market and work out what home loan options you have so you’re in the best position to make an offer when the opportunity presents itself.

How are you going to get there?

Understanding your wealth-building strategy will help you make the right property decisions.

Do you want to buy a property that will have strong capital growth but lower rental yield, or do you want something that might give you a higher return on investment but not increase much in value? 

While there is no right or wrong number when it comes to the amount of investment properties to hold in your portfolio, what is important is to find — and buy — the right properties based on your strategy.

Picking the right property is all about your strategy. Picture: Getty

If your investment strategy is to flip houses, the type of property you’re looking for will likely be different from someone who’s wanting to use their investment property to generate rental income.

Doing your due diligence means you’re more likely to end up buying a property that executes on your plan.

You don’t have to go on the property investment journey alone. There’s a wealth of advice available and experts ready to lend you a hand.

A really important step is to speak to a bank to understand the different loan options available.

Before purchasing an investment property think through the features you might enjoy as part of your mortgage. You could save money by taking advantage of features such as an offset account, flexible repayments, the ability to redraw funds or the ability to split your loan between variable and fixed portions.


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