Expert Advice with Lindy Lear. 02/08/2018
As an investor building a portfolio of properties, how important is it to aim for geographic diversity and have a national perspective?
Read on for 7 reasons why diversity may give you a more balanced portfolio.
City vs Regional
When capital cities are on the up market, regional areas are on the down cycle. When Sydney is up, Brisbane is down. When the mining boom ends, WA markets go down. These are all sayings from the past showing how markets around the country are constantly changing. It seems in 2018 market commentary is now favouring Victorian regional areas, Brisbane as the capital city to buy now and WA as the next state to come out of the doldrums. How the markets and sayings change!
Investors who understand property cycles around the country, buy in the right market at the right time and have a natural diverse portfolio. They buy in locations that are showing the drivers of growth at the beginning of a property cycle and avoid markets at the peak of a property cycle.
If affordability is stopping you growing your portfolio, broadening your horizons could be the answer. Many investors priced out of the Sydney and Melbourne markets are looking for opportunities in other markets and other states where prices are much more affordable. They understand what is driving growth in other areas and can snap up bargains and diversify their portfolio.
If you are buying all your properties in your own backyard because you feel it is less risky, will it give you the best portfolio growth long term? Having all your eggs in one basket may lead to a stagnant portfolio when the property cycle turns and slows again often for many years. Diversity in location will allow you to have growth in your portfolio from various property cycles happening around the country and is lowers your risk.
Familiarity with certain suburbs can be counter-productive and may lead to missing investment opportunities in suburbs considered “the wrong suburbs”. There can be too much emotion and not enough objective data in the equation. Investors then miss out when growth occurs through gentrification, new development and growing demand. Diversity of location within a city or state can bring great results when the numbers stack up, rather than relying on familiarity and local knowledge only.
Growing a portfolio of properties in one state can be expensive with land tax obligations hitting you in the face after property 2 or 3. Diversity of state can bring more affordable opportunities and growth from capturing the right property cycle at the right time and a new land tax threshold for each state.
How many investors aim for a balanced, low risk, growth portfolio only to find it does not deliver the results they wanted. The market goes flat and they find themselves stuck waiting for the next growth cycle. Investors who want a low risk, balanced portfolio who buy in diverse and different locations and states may have better long-term results.
Lindy Lear is a successful property investor who had a late start into investing, yet she built a portfolio of eight properties in just three years. She is a qualified property advisor and general manager of Rocket Property Group, and she won the Reader’s Choice Award in 2009, 2012 & 2013 for Property Investment Advisor of the Year. Lindy is passionate about helping others realise their goals through investing in property, and can be contacted on Ph: 1300 850 038 or visit www.rocketpropertygroup.com.au
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Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.