Variety is the spice of life, but how does that idea apply to your investment strategy?
As far as investment assets go, property investment has long been considered one of the safest wealth generating strategies available.
Shares can change rapidly – often in minutes – rising and falling frequently. Property prices on the other hand grow at a steadier pace – traditionally doubling every 10 years (although that measure is less reliable nowadays). Rental returns, meanwhile, provide investors with the benefit of a regular weekly income that can quite often cover the majority of holding costs, especially in a low interest rate environment like we are currently seeing.
In recent years, however, the Australian property market has shifted from a smorgasbord of opportunity to pockets of prosperity. Price growth has slowed across most markets and investors now have to look further afield for impressive returns. There is still plenty of opportunity in the Australian market; you just have to be a little smarter in your approach.
Diversifying your assets is a popular strategy and one that will reduce your exposure to risk. A diversified property portfolio will ramp up the resilience of your assets. More often than not, if one market is underperforming, chances are another market is booming. Therefore, owning property in several different markets should keep your cash stream flowing – even during those flatter periods.
Frequently, investors make the mistake of centralising their investments in one city or suburb due to previous successes or current confidence in the market. Unfortunately, this approach can have disastrous consequences if that particular market goes down. Branching out and purchasing properties across several locations is a great way to strengthen your investment portfolio, while lowering risk. If you only own two properties in a regional market, try looking towards the city or a metropolitan suburb for your next purchase.
Don’t be afraid to look outside your state either as there could be many opportunities to be had across the border. Property prices, stamp duty and land tax vary from state to state and you’ll be surprised at just how much money you could potentially save – or make. Diversifying the type of property you own can also boost the performance of your portfolio.
The unit market offers a whole new world of opportunities, with lower entry prices and competitive rental returns just to name a few. Moreover, looking towards an inner city unit as opposed to buying a four-bedroom detached house will immediately broaden the scope of your tenant demographic.
Like all wealth-generation strategies, there are no guarantees, and while a diversified portfolio will certainly improve your odds of success there is no way to completely eliminate risk.
At Loan Wize, we specialise in providing advice to ensure that you find the best loan to help you achieve your investment goals.
To discover if property investment is right for you, give us a call today.