Why You Must Diversify

“Diversity comes in many forms and all are worth considering”

I remember a story several years back about an investor from Sydney who was lured to a booming mining town by stories of soaring house prices and almost unbelievable rents.

Convinced he was on the verge of making a fortune, he liquidated his mid-sized, reliable property portfolio in the city and put everything into a few houses in the piping-hot regional resources town.

For a while, he was the envy of his investor friends. Money was pouring in from rent – thousands of dollars a week thanks to a critical housing shortage – and he planned on offloading for a hefty premium in a year or so to the next hopeful investor.

But then, one day, the mine closed and sacked its contractor workforce.
The demand for housing evaporated overnight and he was left with no tenants, no rental income, and assets worth significantly less than what he paid for them.

All of his eggs were in one basket… and not a very good one at all for those of us who understand property investment fundamentals.

This is a perfect example of why you must diversity when it comes to property investment. But I’m not just talking about location alone.

Diversity comes in many forms and all are worth considering.

Location, location, location!

You’ll hear a lot of experts tell you to have a good mix of locations in your property portfolio, and it’s great advice for a number of reasons.

For one, investing in more than one town or city means you’ll reduce your risk should prices fluctuate.

Like with our friend in the example above, going all-in can have disastrous consequences – especially in inferior locations.

Real estate in Australia is not one single market.

It’s many, many individual ones that each have their own drivers, good and bad, and can be in wildly different places at any given time. One might be experiencing an upswing while another is in the midst of a correction.

On the flipside of this, spreading your portfolio across multiple locations also increases your potential reward, so it’s not just about risk.

Intimately understanding each market presents an opportunity.

Savvy investors will be on top of potential changes to price drivers – both up and down – such as infrastructure investment, zoning adjustments, major development, gentrification and localised supply and demand factors, to name a few.

This knowledge can help you to see growth or softening before it occurs.

Armed with this, you can make highly informed buying and selling decisions – and reap the rewards.

There are also benefits when it comes to reducing your land tax liability by spreading your assets across different states.

Diverse dwelling mix

A diverse portfolio isn’t about location alone. It’s worth looking at your personal situation, conducting a risk analysis and seeing whether a mix is required.

There’s diversity in dwelling types across residential, commercial and industrial, too.

A diversity of investment outcomes might also be important for you because focusing entirely on cash flow leaves less room for potential capital growth and vice versa.

And timeline is another factor when it comes to diversity.

If you’re looking at an asset that you think could have good development potential, say for a few townhouses, how long do you need to sit on it to realise the best profit? Is it worth waiting that long? Can you even afford to?

The more you think about portfolio diversity, the better you can understand your situation and what you need to do to lower the chance of mediocre growth and increase the likelihood of sustained wealth creation.

Know your appetite

Many of these questions surrounding portfolio diversity come down to your individual risk profile.

Those who aren’t in a position to take on riskier deals – people nearing retirement, families on one income, investors just starting out or those who are highly leveraged – might look at diversity in a different sense to an experienced small-time developer or experienced investor, for example.

Take our friend in the example above. If he really wanted to roll the dice on a mining town investment – not that we would ever advise to invest in one-industry locations – and he could weather the potential risks, he might’ve considered doing it in a way that retained his balanced portfolio and minimised any future fall-out.

Even if he’d not seen the tanking market coming, he would’ve lost considerably less by focusing on a diversified approach. He certainly wouldn’t have been left with absolutely nothing at the end of the day.

The type of different eggs you decide to put in your basket, so to speak, depends very much on your situation.

And as with any investment you’re considering, enlisting the help of highly experienced and accredited experts is always essential.

That’s because they can help you navigate the possible minefields and future-proof your portfolio with a healthy mix of assets across diverse locations and dwelling types.

High-Performance Property Investment in
5 Simple Steps

In this free guide, you will learn how to Implement the same strategies that led me to build a $3.5 million dollar portfolio in less than six years. – Daniel Walsh

Related Post


Respecting your Privacy

Your Property Your Wealth Pty Ltd (YPYW) is committed to supporting the Australian Privacy Principles for all fair handling of Personal Information which set clear standards for the collection, use, disclosure, storage of and access to Personal Information collected during the course of business operations and compliance with the Privacy Act 1988 (Commonwealth) and its amendments (the Act), and the Australian Privacy Principles (APPs) set out in that Act. You can see the full text of the APPs online at the Office of the Australian Information Commissioner’s website at:


Personal Information means your name, mailing or residential address, telephone number, email address and other transaction and registration details including the company you work for and your role and financial information, including credit card information and information collected from credit reporting agencies.

Our respect for your rights to the privacy of your personal information is paramount.  We have policies and procedures in place to ensure that all personal information, no matter how or where it is obtained, is handled sensitively, securely and in accordance with the APPs.

This Privacy Policy sets out:

  • What sort of personal information is collected and stored;
  • How information is collected and used;
  • What happens if you choose not to provide the required information; and
  • How you can request access to the personal information we hold about you.

From time to time it may be necessary for YPYW to review and revise this Privacy Policy. We reserve the right to change our policy at any time. Amendments or replacements of the Privacy Policy will be posted on our website.

Collection of Your Personal Information

We only collect personal information relevant to our business relationship with you so that we can provide our services and products. We may collect your personal information:

  • directly from you including via telephone, email or facsimile;
  • when your register on our website;
  • when you place an order or service request with us;
  • where you access and interact with our website;
  • from other sources including a third party such as credit reporting; and
  • any correspondence we receive from you.

Is your personal information secure

Where you submit personal information, we manage it by using up-to-date techniques and processes that meet current industry standards to ensure that your personal information is kept secure and confidential. We also take measures to destroy or permanently de-identify personal information if it is no longer required.

Use and Disclosure of Personal Information

You acknowledge and consent that by providing your personal information to us that we may use and disclose your personal information for the purpose for which it was collected or for a related or ancillary purpose such as:

  • supply of our services and products to you in accordance with our Terms and Conditions and any agreement entered into with you, to facilitate, process, carry out and respond to your request;
  • to our third party service providers to assist us in providing and improving our services and products to you and developing, improving and marketing our services and products to you;
  • for regulatory reporting and compliance with our legal obligations, to various regulatory bodies and law enforcement officials and agencies to protect against fraud and for related security purposes;
  • to the seller or supplier of any products to you for the purpose of ascertaining and obtaining any information required to perform our services for you;
  • to identify you and conduct appropriate checks, including credit checks;
  • set up, administer and manage our services and products and systems, including the management and administration of an account;
  • to train and develop our staff to better provide services to you;
  • to contact you; and
  • to our successors and/or assigns

What happens if you do not want to disclose personal information?

You have no obligation to provide any personal information requested by us, but if you choose to withhold personal information, we may not be able to provide you with the products and services that depend on the collection of that information.

Removing your personal information

You may contact us at any time in writing and request that we remove and delete your stored personal information.

Providing Personal Information About Another Person

You represent to us that where you provide personal information to us about another person, you are authorised to provide that information to us, and that you will inform that person who we are, how we use and disclose their information, and that they can gain access to that information.

Linked Sites

YPYW’s website may contain links to websites which are owned or operated by other parties. You should make enquiries as to the privacy policies of these parties. We are not responsible for information, or the privacy practices of such websites.

How can you access your personal information?

You may in writing request access to personal information that we hold about you. We will provide you with access to personal information in accordance with the Act and APPs and we may not grant you access to the personal information that we hold where the APPs allow us to do so. If you are refused access to information, we will provide you with reasons for the refusal in writing.

How to contact us

If you have any questions in relation to privacy, please contact us on 0490 912 045 or email Daniel Walsh – admin@ypyw.com.au. For more information about privacy law please visit http://www.oaic.gov.au/privacy.

High-Performance Property Investment in 5 Simple Steps

In this free guide, you will learn how to Implement the same strategies that led me to build a $3.5 million dollar portfolio in less than six years. – Daniel Walsh