How to Build and Manage a Diverse Property Portfolio in Australia

What does it take to build and manage a diverse property portfolio? Portfolio property management requires knowledge, patience and industry support. Here are our top tips to build a successful and diverse property portfolio.

What Makes a Property Portfolio “Diverse?”

A diverse property portfolio includes a mix of residential, commercial and industrial properties to diversify your investments. Diversification is a core principle when it comes to investing and applies to not just property investment, but also shares stocks and assets. By spreading your investment over different types of property, it steadies your portfolio if one market declines. This provides stability to your folio and protects it from severe losses.

Investing in Residential

If you’re new to property investing, a residential property, such as a house, unit or apartment, makes for a sensible first entry into your folio.

Starting small with something you can afford is a smart approach. One benefit of residential investing is the ability to use the equity built in one property to fund your next investment.

By investing in a mix of apartments, houses, and townhouses, you diversify your interests. This means that if one property type falls out of favour, you’re buffered by other investments, minimising risk.

Investing in Commercial

Once your portfolio has built up from residential investments, you may consider exploring commercial property. Commercial properties include warehouses, offices, retail and self-employed businesses. They’re typically more expensive, and require more hands-on management and maintenance, but can carry longer lease terms, lower turnover and higher rental yield, creating what can be a secure and reliable investment when done right.

Rental Yield vs Capital Growth in Property Investment

Yield refers to the difference between regular rental income and the costs associated with property management, maintenance, and other costs. A high rental yield means the property retains its status as a source of passive income. Capital Growth refers to how much your property grows in value over time.  When considering property portfolio management, both have a role to play. A high rental yield keeps you in the property market for longer, while capital growth is where you can make strides, buying and selling property and transforming your wealth. Investments Accelerated’s Trent Alexander states ‘If you only focus on rental yield, you might miss out on properties that could grow significantly in value over time. ‘ [1].

What Are the Risks

While property investment is generally considered a more stable form of investment, there are no guarantees of success when it comes to property. Building a property portfolio means knowing that you’re at the whim of the market, meaning if the market downturns or crashes, it can impact the value of your investment.

Additionally, be mindful of property deterioration. This is where working with an insurance broker is integral, as a good broker will recommend the correct setup for building insurance. What works for a residential property is going to be different from the right solution for a commercial.

From vacancy (no tenants) to property damage (bad tenants), there’s plenty to consider when choosing to invest [2], so choose wisely.

It’s worth getting the assistance of professionals. In addition to an insurance broker, you can also consider the services of a property manager, buyer’s agent and property adviser.

If you’re building, managing, or expanding a property portfolio in Australia, speak with a MoneyQuest mortgage broker today. We can negotiate the right loan type for you, manage relationships with lenders, and keep an eye out for lower interest rates to avoid paying too much in interest. Contact us and start your investment journey today!

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