In order to grow successful and diversified property investment portfolios, investors must obtain or already possess a number of properties, spreading their money across a variety of investments without depending on the returns of a single investment.
Many investors begin this process by using the equity from their current home to purchase their first investment property. The aim is to let both of the properties increase in value, and then purchase a third property. The higher the number of properties an investor is in possession of, the quicker their equity will rise, therefore allowing for more properties to be purchased.
This simple strategy is used by investors to grow a well-diversified property investment portfolio across the globe. Although it does take time to build a portfolio one can be proud of, once you have just a handful of properties in your portfolio, it will give you a good combination of income for today, increasing income in the future and capital growth over a period of time.
If you plan to live off the proceeds of your investments, you should put a suitable property investment strategy in place. This may result in you putting purchasing on hold for a short time whilst spending time on your investment property portfolios. Alternatively, or you could sell one of two of your properties to bring down the total cost of loan repayments. This could benefit you in the long run.
So why is it important that you keep well-diversified property portfolio investments? It’s simple. Having a balanced portfolio means mixing different investment holdings such as bonds and shares, as well as property. Diversification also allows you to showcase properties in different geographic locations and also different types of properties (commercial, residential etc). By increasing your property exposure via an investment portfolio, you can benefit from varying your investment opportunities, minimising risks and maximising returns.
Listed property features in many diversified portfolios due to the fact that their returns typically have a low correlation with the performance of other asset classes (fixed interest, equities or cash, for example). Adding a commercial property to your portfolio can also be hugely advantageous. It can provide an opportunity for reliable yields, as rental income from these is usually much higher and more secure than yields from other types of assets.
Over the medium to long term, commercial property can bring reasonable risk-adjusted returns. Most of the return will come from income, likely to be somewhere between those of shares and bonds. Investment markets move up and down continuously. Therefore, finding the right balance for your property investment isn’t easy. However, time spent weighing pros and cons will certainly help you on your way to achieving an impressive property portfolio.