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The importance of diversification in the property market

investor-stories
1 minute read

The importance of diversification in the property market

by Cameron Micallef 11 December 2019 1 minute read

Despite the strong gains in sections of the property market, investors are being reminded: Don’t put all your eggs in one basket.

Diversification in the property market
December 11, 2019

In a conversation with Smart Property Investment, Rethink director Scott O’Neill discusses the importance of diversification when building a property portfolio.

Having previously invested in residential property, Mr O’Neill explained he has “moved more into commercial, so I’ve purchased four more commercials since then”.

“[I’ve] invested in a syndicate as well, which is basically purchasing large-scale commercial assets but owning portions of it. It’s almost like a form of diversification. Youve got bigger, better quality tenants, and you dont have to own 100 per cent of the assets sometimes,” the property investor explained.

Knowing the business

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Just like investing in property, it is vital for investors in commercial real estate to understand the market they are buying into.

While some leases “just need a tidy up”, others have potential red flags that property managers need to be aware of.

“One thing I would always try and get from the current owner is bank statements, or at least rental receipts to see the timing of their payment, because if theyre paying in the first three days of every month for the last 12 months, thats a pretty good indication theyre going to do that when you own it,” Mr O’Neill explains. 

Finally, the property manager advocates for visiting the site and having a conversation with the locals before purchasing any retail assets.

“A lot of just on the ground research, like going to see these properties, especially when its retail related,” Mr O’Neill said.

“I dont go look at all warehouses, for instance, because you dont care about foot traffic and stuff like that, but a good retail asset, like you know, a shopping center, you need to go and just sit in it, have a chat to the cafe owners and that. 

“Theyre always going to be the most negative, Ive found, because especially if some random starts asking how business is. What benefit do they have to say theyre going great? But its still good to hear what theyve got to say and just take it on board,” Mr O’Neill concluded.

The importance of diversification in the property market
Diversification in the property market
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About the author

Cameron Micallef

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your... Read more

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