expert-q-a

Investors ask: Risky property investment

By Tatiana Coulter

Q. I understand that all property investing comes with inherent risks, but how do these risks evolve as your portfolio grows? What can I do to minimise the risks of building a large multi-property portfolio?

A. The three biggest risks of investing in a large property portfolio are diversification, liquidity and cash flow.

With any good investment portfolio, it’s a good idea to have your money invested across a number of different asset classes because asset classes work in different market cycles and you want to be able to get the best of both worlds.

Secondly, there’s liquidity. Having an investment portfolio with property can mean it’s very hard to access cash. If you fall across hard times, it’s not easy to just sell it off to get that buffer that you need – whereas if you have shares, you can actually sell off a parcel of shares and have that money in your account in 24 hours.

And lastly there’s cash flow. A lot of people with rental properties rely on the tenant to actually pay the mortgage. If you don’t have a tenant, you’re going to have to foot the bill.

Tatiana Coulter, founder and principal, Monarch Advisory Group 
Tradebusters Connect Expert

 

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