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The importance of diversifying your property investment portfolio

Even experienced investors can fall into the habit of making a series of similar investments either out of convenience or because they feel comfortable investing in a certain type of property. Despite economic fluctuations, the property market has remained a reliable and lucrative investment, this does not mean, however, that a property investment portfolio does not need to be diversified. Below we look at property investment diversification in more detail…

Why is diversifying your investments important?

Diversification is important as it ensures in the unfortunate event that a particular industry or area experiences an economic downturn, an investor will have other investments to fall back on. For example, if a property investor invests in residential properties in the same neighbourhood and this area is hit by an unforeseen flood, it could be financially disastrous for an investor. 

Are there any financial benefits to diversifying a property investment portfolio?

Diversifying an investment portfolio helps an investor reach long-term financial goals while minimizing risk. If an investor chooses to invest in both residential and commercial properties, they are safeguarding themselves against one industry, such as high street retail, collapsing as they have residential investments to maintain cash flow.

What are the negatives to diversifying a property portfolio?

Even for seasoned investors, investing in a different type of property or a property in a new area can be overwhelming. If an investor has not had experience working within a certain industry, such as owning a retail building, it can be difficult for them to find an investment they feel confident in and feel comfortable purchasing. In 2018, it was estimated 3,800 stores closed across Australia, this statistic can make investors considering the commercial property market hesitant to invest as it suggests an irregular cycle of tenants and possible rent arrears. 

How InvestorKit can help

If you are a property investor looking to diversify your portfolio, InvestorKit can help. We are an elite buyers agency who source and secure property investment opportunities for our clients. Whether you are a first-time investor or a professional residential investor looking to break into the commercial property market, contact us today to find out how we could improve your cash flow and wealth.