Why Portfolio Diversification is Important to a Growing a Portfolio....

45 properties in 2009, in great locations, and created an additional job for QLD...you must be a proud Aussie. Thumbs up

Somersoft Property Investment Forums - View Single Post - Where are your properties?

 

Hi Richard...I thought you sold a couple of your blocks...to develop somewhere in Brissie?

 

worked well for you

 

so does North and East, in other words as rare as hens teeth

 

Most PAYG folks don't have the number of properties to make it worthwhile to do this.

 

Hi Sash

You portfolio is not just diversification across states though is it, is there diversification of yield etc also?

 

If you mean quality of property yes....because there is a direct correlation. Though there were properties in Sydney bought for a song have something like 15-20 plus yields on them based on the orginal price. For example a 1 brm unit bought in Dulwich bought for 95k now rents for 365pw. That represents almost a 20% yield. Some bought more recently only have 5.5% yield based on the original price. Having said that my yields have gone down as the property prices have risen dramatically. It is now more like 4.5% average based on the current portfolio value. Rents are a great .starting to tip over 450k pa.

The house I bought in Melton for 150k in 2007 odd now rents 250pw. Not a great yield but still positive. That is 8.6% yield.

Yet the one in Shellharbour bought 242k in 2012...now rents for 380pw. That is 8.2%

The better one is obviously Shellharbour.

 

@sash you will like this - Shellharbour is No.4

 

To me (and similar to what others have said), portfolio diversification just makes sense for basically 3 major (lots of minor) reasons.

1. Investing your entire portfolio in one state will almost guarantee that your portfolio will not be growing (or growing minimally) at some point for quite a number of years. This will have a direct impact on growing your wealth and therefore affect your goal timelines.
2. You will miss out on other state cycles and therefore miss out on great opportunities acorss Australia when that state and their respective suburbs are at the ripe part of the 'investment clock'.
3. Long term risk mitigation. Any economic factors that are unique to a particular state will again affect your entire portfolio, and not just a portion of it.

Just my 1.5 cents.

 

Exactly my thoughts as well, it's not a popularity contest. I don't care which capital city/ large metro area I buy in if the numbers make sense and I'm not too late to obtain reasonable value in a market.
Ready made deposits for the next purchase are always available as something somewhere is always growing.
Under performance by one city over a number of years slows down the process of growing your capital base.
Thankfully all capital cities markets are generally at different stages of their cycle.

 

+1

 

Yes...saw that I don't how long it can go...it is crazy how the hell does a house I bought for 241k...rise to 500k plus in about 4 years. Insane! The only explanation is people from Sydney are buying there. At some point this market will also settle.