When it comes to investing in real estate and building a property investment portfolio, everyone has a different approach.
While property can be a super investment, some prefer to buy locally, whereas others purchase interstate. Some prefer apartments and others are interested more in houses with land.
However, one of the most frequently asked questions we get at Worth Property Investing is: should I buy one expensive property or several cheaper properties?
Our preference is to buy several smaller properties.
We’re quite passionate about this too, and here’s why:
- It allows you to diversify your risk
The saying, don’t put all of your eggs in one basket, applies here. When you invest in property, you’re looking for the best return on investment from both capital gain and rental income.
This helps cover the mortgage and expenses that come along with it.
In this regard, it’s better to have several cheaper investments, as if one property is vacant, it’s much easier to manage your overall expenses as the others will still be earning income. After all – it’s very unlikely they would all be vacant at the same time.
- You can diversify your portfolio too
Property markets all around Australia go through continual cycles of growth and stagnation.
Having several cheaper property investments strategically located across many different suburbs and states helps buffer you against all of these cycles. Whereas with only one property, you are directly affected by market forces.
- Pay less tax
Different Australian states have different real estate laws, including thresholds for paying land tax.
For example, in NSW in 2019, Land tax is applied to houses over $692,000 in value. With several smaller properties around Australia, you can strategically keep under these thresholds and pay less tax.
- It gives you more options
If you find that you’re going through a financially difficult time or you need an injection of funds, having multiple smaller properties gives you the option to sell one and free up capital while still remaining in the property market.
However, with one expensive investment, you may be forced to sell your entire portfolio and you may not need such a large amount of money.
- Better overall income generation
Of course, people build property investment portfolios to increase their wealth.
When you purchase real estate in a range of between $350,000 – $575,000 in the right locations across Australia, the overall rental yield will generally be higher with a mix of well-located cheaper investments as opposed to a single, million-dollar property.
To give you a general example, here are some recent property statistics on the market.
Single, more expensive investment property located in Sydney
| Purchase Price | Weekly Rental | Rental Yield |
| $ 1,500,000 | $950 | 3.3 % |
* The example used in this scenario, is for a 4 BR house located in Caringbah South, a suburb in the Sutherland Shire. I have used the median property price and rent.
Multiple, cheaper property investment portfolio.
| Purchase Price | Weekly Rental | Rental Yield | |
| $ 347,905 | $ 420 | 6.3 % | |
| $ 491,500 | $ 480 | 5.1 % | |
| $ 478,000 | $ 500 | 5.4 % | |
| Total | $1,317,450 | $1400 | 5.5 % |
* The 3 examples used are for investments we have recently purchased.
However, it all comes down to making the right decisions on where and when to buy.
A property buyer’s agent can really help guide you.
How can Worth Property Investing help you build a diversified investment property portfolio?
At Worth Property Investing, we partner with you throughout your investment journey.
Led by Simon Read, we are passionate about building a strategically sound and highly diversified property portfolio which offers you all of the 5 benefits listed above.
As your trusted licensed property buyer’s agents, our experienced team guides and supports your property investing education, so you can achieve your property goals sooner.
Worth Property Investing can help you find the right property to meet all your requirements when considering your next purchase. We use real facts, due diligence and solid research to locate the right investments, and we have a proven track record to help you succeed.
CLICK below to download our free TOP 10 PROPERTY INVESTMENT RULES e-book today
You’ll get all the essentials you need to understand the role solid research plays in achieving property success.
Don’t put it off any longer – contact Worth Property Investing today and start achieving your property investing dreams!
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