Diversifying your property portfolio is a great way to protect multiple assets, particularly if one isn’t performing as well as the others.
It also minimises risk and exposure to market and environmental fluctuations, such as population, migration, politics and economics.
Here’s our top 3 tips for diversifying your property portfolio.
- Get out of your comfort zone
Don’t be too set on the areas you buy in. Suburbs evolve. Trends happen. You don’t have to stick to your favourite hotspots. While still doing your research and keeping an eye on suburbs with strong capital growth and an abundance of amenities, expand your search zone.
Besides, if you only stick with what you know or are comfortable with, you could be exposed to changes beyond your control, such as zoning laws or infrastructure developments. This could negatively affect your property, so don’t just stick to an area because it worked for you in the past.
Plus, if all your properties are in the same area, that experiences a negative change, your whole portfolio will take a hit.
- Be flexible with your structure
If you can, it might be worth splitting your cash into two different investment properties. Buying two cheaper properties can be better than buying a more expensive one. Owning two assets gives you flexibility and security. If you need to, you can sell one and retain one. And, it helps reduce capital gains tax.
- Mix it up a little
You should also consider different property types. This enables you to spread your risk across properties that appeal to different market segments – ie young families, couples, singles, etc. This is advantageous in terms of both rental return and re-sale value. It will also help when buying across different price points.
Before you do any or all of these things, it’s worth assessing your financial status and working out the best strategy to use to achieve your wealth goals.
If you want to learn more about diversifying your property portfolio, why not complete our Getting Started form to get the ball rolling.
And, if you’re already contemplating how to tackle the property market in Perth, why not download our free Get Ready to Invest in Property eBook here.