Having a diverse property portfolio in a mixture of states can reduce the likelihood of investors making panic sales when things go south, as it is less likely that every property will be struggling through market declines simultaneously.
Having a diversified portfolio that spans “the whole country” can build security and resilience for property investors, particularly in Australia’s current property market climate, 26-year-old property investor Arjun Paliwal said on the Smart Property Investment Show.
Since the age of 22, when Mr Paliwal acquired his first investment in Sydney, he has built a nine-property portfolio, purchasing four investments in Tasmania, three in Brisbane and one commercial property in Melbourne.
“I think looking back at it… you can be sort of immune to some of the larger shifts that happen in any one place because you are spread,” Mr Paliwal added.
Despite the significant property market downturn in Sydney over the last 18 months, Mr Paliwal said that knowing he owns one property within that city, alongside his other investments, has cooled his jets.
In other cases, some investors may be inclined to sell off an investment in a panic, rather than holding out for a peak in the market.
According to the 26-year-old property investor, securing one property investment in Sydney has boosted his comfortability “from a short-term sense”.
Mr Paliwal said: “That first property was in Sydney, I had a bit of an up and then a bit of a down. But what that really taught me was, okay, that is what happens when you take action — things happen.”
He continued: “That’s what really started the movement for me from one to the next. And I think it is a success, because it took me over that fear of learning the what ifs and... started saying, ‘Hey, you’ve made a move. What’s next?’”
Mr Paliwal purchased four properties in Burnie in 2017, a year or two after Hobart’s property market began to surge.
He added that during 2017, 2018 and 2019, 2017 experienced the best growth in the area.
“So based on the type of buyer... the type of purchase and where the numbers are at now, it’s anywhere between 35 [and] 45 per cent of a rise,” he said.
“That’s such a short time. It’s been a phenomenal result to be able to look back and say, ‘Hey, that busted a bit of a myth.”’
Mr Parwal managed to secure positive cash flow from his investments with around 7 to 8 per cent yields, while realising positive capital growth simultaneously.
“That’s what changed my mind as well on property, when I started to think you can get both too,” Mr Paliwal said.
Mr Paliwal has acquired three properties in Queensland, nestled “in pockets of Brisbane where the prices have been quite affordable” and there is a low risk of the property market busting.
“Even if in those affordable moments, certain things changed, the shifts… [were not] going to be that significant,” Mr Paliwal explained.
He continued: “But actually, it’s been coming along quite well. Some of the values have risen, yields have come along quite well.
“And so I’m still generating that cash flow and capital growth in that Brisbane environment.”
According to Mr Paliwal, the commercial investment property he acquired in the metropolis of Melbourne has been the second best performer in his portfolio.
Commercial property investments do not “move up and down the same way”, according to Mr Paliwal.
He added: “Even if the capital growth movements had a bit of change, when you consider something called total return [and] putting it together, the yield as well as capital growth, you start to see that the numbers are quite strong and quite positive.”
The melting pot of property investments that Mr Paliwal has acquired shows how diversification can favour investors, particularly through peaks and troughs in diverse markets, as there’s always that extra property or two over there somewhere providing safety — therefore reducing the likelihood of a panic sale.