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2 considerations when building a property portfolio

Investing in property can be a great way to make relatively big returns in a short amount of time.

Finding the right kind of investments for your hard earned money can be tough at times. Whether it's stocks and shares, currency or even a start-up business endeavour, developing a plan that can guarantee returns is by no means easy.

However, many first-time investors and seasoned wealth managers are turning to the property market in an effort to make their money work for them. It's relatively easy to see why when the trends in the real estate market across Australia are considered.

In fact, CoreLogic figures explored by National Australia Bank explained that the average price of property in Australia's capital cities increased by 7.9 per cent in the year to the end of April 2015. So, with returns like that available in just a dozen months or so, it's little wonder as to why more people are seeking out real estate as an investment.

The average price of property in Australia's capital cities increased by 7.9 per cent in the year to the end of April 2015.

However, while there's certainly value in the market, what are the ideal steps to take on the path to a solid, profitable portfolio? Well, here are two things to keep in mind:

1. Spread your net wide

Many people miss the best opportunities the real estate market has to offer as they pigeonhole their investment efforts. This can be in terms of a number of criteria, for example, only looking in a specific geographic area or singling out one type of property.

Research collated by ANZ suggested that it's far more productive to spread your net wide and assess newspapers, website listings, real estate publications and agents' lists from right across Australia.

2. Going for rental yield or capital growth

There are two ways to profit from a real estate investment. First, there's capital growth, which is the amount of value the property accrues of its own accord over a set time period. Secondly, there's the income that can be generated from rent.

Investing in property can be a no-brainer once you've ironed out the financial nuances with an accountant.Investing in property can be a no-brainer once you've ironed out the financial nuances with an accountant.

If you're unsure of what direction to take, discuss everything with your accounting firm and establish a baseline for the returns you'd like to see.

In some instances, a years worth of rent may add up to more than 12 months of capital gains, but the amount you can charge and/or the location of the property have to be taken into account.The Commonwealth Bank of Australia explained that picking between the two is tough, but it all comes down to the figures.

Ultimately, investing in property can certainly be worthwhile, but there are a number of nuances to the process that can be hard to overcome on your own. Consequently, talking things through with an accountant is a must if you're looking to build your portfolio, and profit in the long term.

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