Property investment is often defined by the question, how many properties are needed to achieve financial freedom in the Australian residential investment property market?

Of course there is no set and simple answer to this question. The are many factors that dictate the answer. Some of these factors include; the value of the properties in the first place, the amount you are getting as a rental return, months of continuous rental, maintenance issues, and interest rates as dictated by the Federal Reserve Bank and passed on by your lender.

Some of these factors can be controlled by you so that they are not left to chance. Let me explain.

By purchasing a property in the right area you vastly increase your chance of making a good return on your property. You can even go one better than that by buying a block of land in a new subdivision in a growth corridor of Melbourne or Sydney. The land will almost always increase in value on it titles, further, once your house is built you have an excellent chance of the property going up in value even further. Essentially the sum of the parts is greater than their individual value in this case. All of this additional value is equity that contributes to your financial freedom being attained.

Next, as you will design and get built the property, you will be able to dictate the build based on the optimum needed for an investment property. I have written other articles on this point, however suffice to say here that you would not build an investment property in the same way as you would build your own home.

Another benefit of building a property from new is that you will install new appliances and equipment with warranties attached, thereby minimizing maintenance costs. Replacing hot water systems, ovens and air conditioning units can literally wipe out any equity you may be holding.

None of us can negate the effect of increasing interest rates, however, you can still take measures to ensure you are have not taken any needless chances. Take the advice of your broker or investment consultant in terms of the best lender. You will want a lender who understands the needs of an investor. They need to have a competitive interest rate, offer good terms and not hit you with unnecessary fees. I would also add to this that you should ensure the information you give to your lender is completely accurate. I have met investors before who have though it smart to “bend the truth” when it comes to handing over financials or other information. In almost every case that I have seen this, the investor has come unstuck, struggling to meet repayments, having to tap in to equity, or even having to sell up early or under value. All I can say is don’t give in to the temptation.

The final point I would make is that of rental return. By building a new property in an area that is highly sought after by renters you have the best chance of maximizing rental return. Engage a rental agent that you can trust and who has a good record of keeping properties maximally rented out.

Let’s assume you have taken care of with the above points, giving yourself the best possible opportunity to minimize the variables we can answer the question of how many properties.

Using equity from your residential property, that is the one you are living in now, you will buy and build your first property. After 12 to 18 months that property will be built. Given current real estate prices, you would be ready to take another deposit out of the equity about 12 months later. After that second property has been bought, built and allowed to increase in value, you now have deposit for your next property, while equity from your original property is now building up your nest egg.

This pattern is repeated until you have built your fifth property. Once this property has increased standardly in value you will be in a position to sell this property. You can use the money you have made from this property to completely path off the majority of your properties, if not all. You will be left with four rental properties each paying you very single month. Taking out your costs for maintenance and management you will have a standard income being paid with very little risk. Even if there is a vast change in property values or interest rates you will be left minimally exposed. This is entirely possible for anyone to do with enough equity in their home to pit s deposit on a first property and the ability to borrow the balance.

The usual time this would take is around 10 years. To ensure this pattern can be easily followed and complete you should consult a property investment expert who will help you to achieve financial freedom through residential property investment.