Don’t Put All Your Easter Eggs In One Basket
Happy Easter to all our readers!
As we approach this festive season, it’s a good time to reflect on the importance of diversification, especially when it comes to property investment. We all know the saying “Don’t put all your eggs in one basket,” and this applies perfectly to the world of real estate.
For those of you who currently own property that is negatively geared, it’s time to think about diversifying your portfolio to include positively cash-flowed properties. Negative gearing can be a good strategy for some investors, but it’s important to understand the risks involved and not rely on it too heavily. Negative gearing is when the cost of owning a property (such as mortgage payments, property management fees, and maintenance costs) exceed the rental income received. This can create a tax benefit by reducing your taxable income, but it also means that you’re losing money every month. While negative gearing can work in your favour over the long term, it’s important to have a balanced portfolio that includes positively geared properties too.
Positively geared properties are those that generate more rental income than the cost of owning them. This means that you’re making a profit every month, which can help you to hold onto other properties or invest in more. It’s important to note that positively geared properties are not always easy to find, but they are out there if you know where to look.
When you diversify your portfolio to include positively geared properties, you reduce your overall risk as an investor. If one property is not performing as well as you’d hoped, you have other properties that can help to balance it out. We have found that in this current high-interest rate environment, some traditional investment properties may now be negatively geared. This is especially important in times of economic uncertainty or market volatility, as it can help to protect your assets and minimize your losses. We often craft a property Strategy for our investor clients that involves the disposal of a negatively geared property like an apartment or a unit with high holdings costs. This allows our clients to acquire multiple positive capital properties which supercharges their portfolio.
Diversification can also help you to achieve your long-term investment goals. If you’re looking to build wealth through property investment, it’s important to have a mix of properties that generate both short-term and long-term returns. For example, a positively geared property can help you to generate immediate cash flow, while a negatively geared property may provide long-term capital growth.
Another benefit of diversification is that it allows you to invest in different locations and types of properties. If you have all your eggs in one basket (or one property), you’re limiting your potential for growth and exposing yourself to more risk. By diversifying your portfolio, you can take advantage of different markets and investment opportunities.
For those of you who are unsure of where to start when it comes to diversifying your property portfolio, it’s important to seek professional advice. A financial advisor or property investment specialist can help you to identify opportunities and make informed decisions based on your individual circumstances and investment goals.
In conclusion, we hope that this Easter season reminds us all of the importance of diversification in property investment. While negative gearing can be a good strategy for some investors, it’s important not to rely on it too heavily and to have a balanced portfolio that includes positively geared properties. By diversifying your portfolio, you can reduce your overall risk, achieve your long-term investment goals, and take advantage of different markets and investment opportunities. So, don’t put all your Easter eggs in one basket when it comes to property investment – spread them out and watch them grow!