Investment Property Diversification and Risk

A basic principle of investment is not to have all the eggs in one basket. Spreading risk through diversification has always been considered prudent in any investment plan. This principle applies to investment types, for example property, shares and fixed interest. This principle can also apply to a property portfolio by acquiring a mixture of residential and commercial property.

Diversification can also be achieved by investing in residential property in more than one suburb or in a mix of houses & units. Risk can be increased by owning several properties in one suburb or several units in one complex. Greater investment risk is incurred if a suburb is rezoned, or a property next to a unit complex is treated in a manner that could reduce it's overall value. Having investments in more than one location will reduce these risks.

So if your investment strategy is to expand your investment property portfolio, than risk associated with a diversified property portfolio could be reduced where you hold a variety of property types (eg house, unit or commercial property), in a variety of areas (eg. various suburbs, cities and state).

By My Tax Zone

My Tax Zone

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