How to Create a 5 year Investment Plan

When it comes to performance, preparation is key.

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 should be an evolving roadmap tailored to your unique situation.

1. 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.

  • How Much deposit do you have?
  • How much deposit can you leverage from you existing equity?
  • How much can I borrow based on total loan book vs income?

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?

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

2. 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.

3. How are you going to get there?

Create a strategy

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? 

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.

4. Get expert advice

You don’t have to go on the property investment journey alone. A really important step is to understand the different loan options available. Some mortgages can be much more beneficial that other depending on your strategy and long term outlook. 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. Most importantly buy the right property for your circumstances and investment goals. Doing your due diligence means you’re more likely to end up buying a property that executes on your plan. A good buyers agent will know the right property for you and help you secure that at the right price.