Six steps to creating a $100,000 per year passive Income

Income generating property is fast becoming the key wealth creation strategy of many astute investors.

Properties enjoying increased cash flow via a passive income stream offer rapid portfolio growth while enabling the investor to achieve financial freedom sooner

For many investors, one of the most successful passive income investment options is positively-geared property.

In just five to seven years, an investor could be earning more than $100,000 per annum in passive income from a positive property portfolio.

Six tips for success:

  1. Get your structure right – Speak to your accountant to find the most tax efficient structure to use to purchase your properties. Getting this right at the first stage can save you thousands. Many positive property investors have created large portfolios only to pay out huge fees down the track when they decide to change their entity structure for tax purposes.
  2. Make an informed property purchase – Education and research is key.  The town/area should provide a historical growth rate averaging 10% a year over the last five to 10 years.  A population that is trending upwards, a low rental vacancy rate, industrial growth and investment in infrastructure are all indications that demand for housing will remain strong.  Buy in low to maximize your return. Identify temporary down cycles and quiet seasonal periods which may offer opportunities to secure lower priced property. Fundamentally, the property should deliver positive cash flow of at least $400 a week into the investor pocket.
  3. Maximize Leverage – Whether you are using equity in your home or a saved deposit for your first investment property, maximize your means to grow faster.  Borrow 90% and use Lenders Mortgage Insurance (required if your deposit is less than 20%) to leverage your purchasing power and increase your flexibility. LMI is an acceptable and tax deductable method to get your portfolio started and growing. When your portfolio has generated sufficient equity you can start to buy properties with a larger deposit, without requiring LMI.
  4. Purchase again quickly – Each property strengthens your financial position. Within 12 – 18 months of making your first investment, use the equity now available in this property (which you will have created if you have invested in an area which has delivered 10%+ growth per annum) to buy a second. You may even find you have enough equity to buy a third.  Using different lenders will give you greater flexibility and borrowing power.–
  5. Regularly review your property Values–As your properties increase in value, maximize your growth potential by releasing equity from your existing portfolio to raise the required 10% – 20% deposit amount for future purchases.

    Once you have five properties in your portfolio, depending on the growth rate in the area, you will have created a positive portfolio that is paying you in excess of $100,000 profit per annum.

  6. Review your investment goals every six months – Revisit your goals and continually reassess your passive return strategy every six months to ensure your portfolio continues to maximize its return potential. Utilizing your passive income returns combined with capital growth is the key to rapidly growing your portfolio and second income stream.

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Questions

Hi Ryan – how on earth do you have a property that returns $400/week positive? I'd be interested to know… The best I have is maybe $200/week but after depreciation, before depreciation it's about $40/week. Cheers

Comment by Scott Lawton on October 22, 2013 at 6:53 am