Looking to diversify your Perth property portfolio? Or just want to know what it means?
Diversification explained simply is, “don’t all your eggs in one basket”. Even if your property portfolio is limited to one city, such as Perth, there are ways you can diversify your portfolio and make sure your eggs are protected from a big fall.
Diversifying your portfolio opens you up to less risk and exposure from movements in the market and environmental changes such as population fluctuations, migration, as well as political and economic impacts.
So how do you diversify your portfolio in Australia’s most isolated city?
Here are the top 3 ways to diversify your Perth Property Portfolio.
1. Spread out
Some property investors have favoured areas, usually around where they live, or where they have previously had positive capital gains and rental yields from previous investments. These investors often want to buy more properties in the same area.
The main concern with this plan is that it exposes the property portfolio to potential changes outside of the developers control. For example, the local council may rezone the properties or major infrastructure changes that in the area, which could decrease the value of the properties.
If all your properties sit in the same suburb, you will be take a bigger hit across your portfolio.
2. Vary the price point
There are times when buying two can be better than buying one. Having the flexibility to free up cash is one reason. Rather than sinking all your cash into one $850,000 inner city property, you could buy two properties in growth areas (Say one for $380,000 and the other for $470,000) .
By owning two assets, rather than one, means you have the flexibility and security of knowing that you can sell one and retain the other if required.
3. Mix up the style of property
Diversifying across different property styles is also a consideration that could be made and will often come hand in hand with buying across different price points.
Using this strategy, you will be spreading your risk by having properties that appeal to different market segments (eg./ singles, families, young couples without children etc.) both in terms of re-sale and rental demand.
With this approach, you will want to consider the type of property (apartment, unit or house), as well as the number of bedrooms and bathrooms. By diversifying the type of properties you own, you will have more opportunity with re-sale value and rental demand across your property portfolio.
They biggest key to diversifying your Perth property portfolio is to ensure you seek the advice of a professional when you are unsure. Before you settle on your next investment property, look at booking an assessment to see what opportunities are available in your situation and what will be the best way to further build a diverse property portfolio.
Ventura iD and Multi Living Developments offer a free consultation service so you can see if developing is an option for you. Call (08) 9241 1600.