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One of the most important things that every property investor should never forget is to change their strategy to suit the market.
In today’s market, investors will grow their portfolios by following a strategy designed to minimise risk and take advantage of the low interest rate environment through diversifying in historically sound marketplaces.
Following are a few ways you can diversify your portfolio to minimise your risk of loss.
1. Invest in different areas
As you know, property markets are always in a state of flux… today prices are at rock bottom, tomorrow they’ll be sky high.
To diversify your portfolio, buy in the major cities or nearby suburbs, pairing your strategy with the current market conditions.
2. Mix up property styles
Buy both houses and units, letting the market demographic determine which you should buy.
To further improve your returns, find homes offering a unique benefit to your target demographic and which stand out from the crowd.
3. Choose different buyer types
When you invest with the area demographic in mind, this will happen of its own accord.
Know what your target demographic wants and then deliver it.
The more diverse employment your tenants have, the better.
Just imagine…if all of your tenants were employed in the same industry and that industry experienced a huge downturn, your chances of losing income increase more than they would otherwise.
4. Invest in different price ranges
When you buy across a number of price ranges you can increase your cash flow. For example, if you find yourself in need of cash you can sell off one of your lower cost assets rather than a higher priced one.
Not only is the buyers’ market for lower priced properties larger, your capital gains tax liability will also be less with a cheaper property.
5. Keep an eye out for market changes and opportunities
Watch for signs of gentrification and infrastructure spending to locate potential opportunities. Some questions to ask include:
- Is the demand outstripping supply?
- Are prices higher in a particular suburb than surrounding areas?
- Will the suburb undergo a ripple effect from surrounding markets?
Tip: Don’t forget that differences between stamp duty, concessions and land tax, can be reduced simply by jumping across state lines, perhaps saving you thousands of dollars.
To learn more about diversifying your portfolio and minimising your risk, come along to our next Property Investor Night. At this FREE event you’ll learn more about market and investment strategies, what drives the market, how to pay your home loan off quickly and much, much more.
Seats fill up fast so book yours now!