Despite the rampant negativity in the media recently predicting doom and gloom for our property markets, it's still possible to profit enormously from building an investment property portfolio. Of course, it's also equally possible you could lose a massive amount of money if you don't get a few basic things right at the outset.



You see, owning one or two properties is not the same as expanding your portfolio out to 10 or even 20 properties. Your financing strategies and even your purchasing strategies will need to be reviewed and re-considered in a completely different way if you wish to keep expanding your portfolio.

Let's look at the top 3 mistakes investors make when financing multiple properties:

1) All-In-One: A lot of newcomers to property investment make the assumption that it's easier to secure all of your loans from a single bank. The problem with this is that all of your loans will likely be cross-collateralized. While this isn't necessarily a negative, it can make it harder to finance multiple properties, since you'll have equity which you will be unable to access.

Securing all of your financing through one bank also means that the bank will add buffer amounts to your payments. This will lower your real borrowing capacity - which may prove to be a problem when you're trying to finance multiple property investments.

If you decide to spread out your financing between two or more banks, you'll have access to more of your equity and a lower buffer amount added - meaning it will be easier to finance multiple properties.

2) Incorrect Financial Structure: You need to be sure that your financial structure is properly set up from the get go if you want to keep building on your property portfolio.

The bank with the lowest fees or the lowest interest rate may not in fact be the way to go. Before your portfolio grows too large, your loan structure needs to be in place. If you neglect to make sure this is set up correctly, it can be very expensive to refinance your portfolio in the future should you decide to.

You need to decide if you want to go with an interest only loan or a principal and interest loan. You might have signed up for a line of credit, or perhaps you'd rather have an interest-offset account instead.

The loans you select should be those which offer the most favourable tax benefits. If there is something in the loan documents which you don't quite understand, be sure to get an explanation. This is all about your money and your future - remember that there are no stupid questions when it comes to something this important.

3) Friendly Advice: As they always say, the worst advice is free advice. As you get into property investment, don't be surprised if everyone around you is suddenly an expert.

The advice you should take is that from those who have already built a successful portfolio of property investments and of course you should go with the information found in your own research. This is the advice which can help you to get off to a good start with a portfolio of multiple property investments.