Blog Diversify your investment portfolio

Diversify your investment portfolio

21 October 2014
Diversify your investment portfolio

Moving into the property market as an investor can seem difficult. After all, there are a lot of different things to take into consideration before purchasing real estate and establishing yourself as a landlord. But if you're dedicated to making a profitable portfolio, the best time to start working towards your property goals is right now. One of the main things to look into before committing is how much diversity to have in your portfolio. 

Under-performance of portfolios is a very real possibility, especially if the buyer doesn't give enough thought towards the future and planning for the ever-changing economic landscape in Australia. Purchasing multiple types of property is the best way to insure yourself against these dramatic changes in the market, especially if one of the cycles moves into negative territory. This is bad news, especially if the drops in value are significant enough to warrant you actually making a loss on the real estate. 

Here are some useful tips to help you make an informed decision when looking into securing an investment home loan and moving into the property investor market. 

Invest in different areas

Much of an investor's income is based on the strength of the investment property's location. These movements are often cyclical and, given enough time, a pattern can emerge. For example, growing capital city strength is often tied directly to the growth of the population in the region. As more people move into the area, the more people need accommodation. With the incoming population boom expected to push Australia's numbers up in the near future, now could be the perfect time to consider buying homes in capital cities nationwide. 

On the other hand, keeping an eye out for infrastructure developments across both capital cities and regional towns could be another way to test the waters of an area's potential growth. Diversifying your portfolio by buying real estate in different states and regions will allow you to take advantage of the changes happening across the world.

In the event that one market takes a fall, you can likely rely on your other investments to continue growing in the future. 

Choose the right combination of properties

There are a number of different real estate options available across the nation. Two of the most popular are detached houses and apartments, which can offer different types of income and investment opportunities. Both have their own benefits and downsides, but with an emphasis on diversity it could be worth considering a mixture of the two. 

For example, apartments tend to be in more metropolitan regions and offer great rental opportunities for business people. Therefore, this means that the turnover can be faster than houses, which people often settle into with their families for extended period of time. On this note, houses tend to fare better when it comes to increasing property value over the long term. 

Therefore, working with both markets and creating a diverse portfolio means that you can have an income coming in at all times, regardless of whether one market is in a downturn. 

Remain flexible 

Framing your expectations from the market is to be expected. When you first set out, knowing what type of person you're interested in attracting will help you to choose the best route possible to achieve your goals. 

However, on the other hand, the unpredictability of the market means that remaining too rigid can be your downfall. Keep your options open and create a diverse portfolio to begin working towards real estate investment success.