The property market has so much to offer, but you have to be prudent in your understanding of the market-scene. The real estate world moves through a series of crests and troughs and hence it is in your best interest to diversify your property investment portfolio. Mark Armstrong for the Property Observer writes that you can do it in two ways.
You can buy properties over well-spread geographical areas and over wide price ranges. Let us take a deeper look.
Invest over well-spread geographical areas
If you buy your properties over a squeezed geographical area, they stand liable to face a market downturn at the same time. It might be due to a shift of soil or seismic pressure or sudden loss of trust in buyers for that given area. At any rate, all your properties would then fade out quite quickly in terms of price. Thus it is wise to buy properties in different areas (States if possible). This way, writes Armstrong, various steady properties, those which are parts of your portfolio, can still compensate for a fast bottoming-out property.
Spread your investment portfolio across a wide price range
The other diversification is in regards to the price range; a very significant aspect of investing in the Asset Classes. Diversification allows you leg space with the equity. When you diversify and invest in units, apartment, townhouses and condos separately, you can sell anyone of them off in a given year to free up equity and gain cash liquidity. As an aside, this method also helps you to shed a part of your tax liability which would not have been the case had you invested in a single property. After all, you can easily leverage the tax liabilities over two or more financial years because you have brought more properties as a part of your diversification strategy. Armstrong hastens to add that such diversification should never come at the cost of quality.
Diversification insures portfolio-holders like nothing else
Armstrong knows his trade and I think that he makes a few very valuable points here. What is true for stocks and money market instruments is equally true for the residential properties too. The concepts of hedging and leveraging were not meant to be only words. They have a lot of impact on your investment portfolio. For an asset class line-up, risks can pertain to climatic changes, nature’s wrath, governmental legislations, market sentiments, buyer priority and a lot more. Diversification insures a portfolio-holder adequately against any unwanted shift.
The Best Way to Insure Your Property Investment Portfolio
You can buy properties over well-spread geographical areas and over wide price ranges. Let us take a deeper look.
Invest over well-spread geographical areas
If you buy your properties over a squeezed geographical area, they stand liable to face a market downturn at the same time. It might be due to a shift of soil or seismic pressure or sudden loss of trust in buyers for that given area. At any rate, all your properties would then fade out quite quickly in terms of price. Thus it is wise to buy properties in different areas (States if possible). This way, writes Armstrong, various steady properties, those which are parts of your portfolio, can still compensate for a fast bottoming-out property.
Spread your investment portfolio across a wide price range
The other diversification is in regards to the price range; a very significant aspect of investing in the Asset Classes. Diversification allows you leg space with the equity. When you diversify and invest in units, apartment, townhouses and condos separately, you can sell anyone of them off in a given year to free up equity and gain cash liquidity. As an aside, this method also helps you to shed a part of your tax liability which would not have been the case had you invested in a single property. After all, you can easily leverage the tax liabilities over two or more financial years because you have brought more properties as a part of your diversification strategy. Armstrong hastens to add that such diversification should never come at the cost of quality.
Diversification insures portfolio-holders like nothing else
Armstrong knows his trade and I think that he makes a few very valuable points here. What is true for stocks and money market instruments is equally true for the residential properties too. The concepts of hedging and leveraging were not meant to be only words. They have a lot of impact on your investment portfolio. For an asset class line-up, risks can pertain to climatic changes, nature’s wrath, governmental legislations, market sentiments, buyer priority and a lot more. Diversification insures a portfolio-holder adequately against any unwanted shift.
You can read the full article here.
Have you made your property investments over different price ranges?
Related posts: