Diversification is a key mantra when trying to build wealth and investing across different asset classes like shares and property. With many Australians focusing purely on property as a way to build wealth, diversifying your property portfolio within itself can also be a winning strategy.
Expanding Horizons: The Case for Diversifying Your Property Portfolio
Beyond Residential: Exploring Commercial Property Investments
While residential property investment is commonly how people get their portfolio started, investors can also branch out into the commercial property space. While it’s often a less familiar sector for investors, by taking the plunge and diversifying into commercial property, they can benefit from the sector’s wealth-building potential.
Geographical Diversification: Capitalising on Australia's Growth Areas
Property investors can diversify by choosing different locations in a bid to capitalise on the best growth areas around the country.
Variety in Property Types: From Townhouses to Villas
Opting for different types of residential homes to buy is another tactic, such as townhouses and villas as well as simply looking to buy detached houses.
Strategies for Diversification
1. By investing in commercial as well as residential property, investors can cash in on commercial property’s reputation for producing income while diversifying their portfolio.
With commercial property, investors can often deal in much longer leases with better terms than you get with residential, and they can complement each other to form a fully balanced portfolio.
Seeing as commercial property will house businesses over a longer lease period, it’s especially important to choose and screen tenants well to ensure a steady stream of income and to avoid rental vacancies. Commercial property usually attracts good tenants when located in strong economic areas near transport and workforce hubs.
2. If the high costs that are often associated with securing commercial assets are providing a barrier, they can be navigated by investing in a managed fund.
Managed property funds can be a realistic and low-stress way for investors to add commercial property to their portfolio, anything from retail to industrial to medical property in varying locations.
A managed property fund works by investors purchasing a share of an asset or assets, in this case commercial property, that is held in a professionally managed unit fund and in return receive rental income and a portion of any capital growth when the asset is sold and the fund ends.
Building a Balanced Portfolio: The Path to Sustainable Wealth Through Property Investment
By focusing on building a diversified property investment portfolio with both residential and commercial property, investors spread their risk while achieving excellent regular rental income and capital growth.
Give the Perry Finance Team a call on 03 9101 8517 to explore further.
