In our final blog about managing the risks of property investment, OpenCorp Group CEO Matt Lewison looks at how diversification works.
Most people would know it makes sense not to put all your eggs in one basket. When it comes to property investing, we call this ‘diversification’ – and there are some smart ways to do it.
In our previous blogs (Part 1, Part 2) about risk, we’ve talked about what it is, and how to manage it.
At OpenCorp we help clients build portfolios over time, and you can reduce your exposure to risk by being smart about where you buy.
We often say the area where you live isn’t necessarily the best place to invest – and a diverse portfolio is one of our key investing strategies.
It’s something I learned through trial and error. When I started investing with my brother and father, we concentrated on the eastern suburbs of Melbourne, and even then only a small pocket.
We were very active for about six years until the market stagnated and shifted into an oversupply. Things weren’t looking great for the next couple of years.
Fortunately, I headed to Brisbane and saw first-hand there was a huge difference in affordability compared with Melbourne.
Brisbane was a lot more affordable and there was an under-supply of houses, so it was absolutely right for house price growth for the next couple of years – and we caught that investment wave.
When Melbourne property prices were slowing, Brisbane was going up and we caught the bug for diversification from that. It really opened our eyes to investing in different states and that’s something we now advocate to other investors.
The logic is simple: when one area (or one demographic) is stalling, prices will likely be rising in another. Investing in property across state borders brings more affordability as well as a balance to your portfolio.
I had never been to Perth when I started investing in the early 2000s, but a mentor of mine suggested I look at the WA property scene. I was converted from the outset because that market nearly doubled in 3½ years, which gave me the equity in my portfolio to take advantage of the next growth market in Brisbane.
But there’s one risk we haven’t talked about much, which is probably the biggest risk of all of them when you’re considering property investment: not investing at all.
You can look at risk factors as reasons not to take the plunge but imagine if you’d bought a property 15 or 20 years ago, and what it would be worth today.
Then take a second to think about if you didn’t just have one, but had two, or three, or four properties in your portfolio, and what that would have created for you financially.
That’s the OpenCorp message – build your portfolio, build your equity over more than one property, spreading and minimising any risk.
If you’d like to know more, don’t waste another moment – contact us.
