Hello All.
I’m just new to the forums and would really appreciate your feedback on a question that has bothered me for a while.
I have been investing for about four years, I have five IP’s, four of which are located in the same town. These properties are performing well some as high as 13% return.
There are more IP opportunities available but I’m concerned about limiting my investments to only one place. Am I in danger of having all my eggs in one basket, and being struck hard if the town has a downturn, would I be better off taking a lower return elsewhere to spread my risk.
What are your thoughts guys and girls?
Cheers.
Ryan Crawford
Ryan,
I’m new myself so everything is IMHO.
I remember reading somewhere (think it was one of Warren Buffett’s texts) where he was quoted as saying the best philosophy is to
1. Put all your eggs into the best basket and
2. Watch that basket !!Even though it ran against the grain of what all the investment guru’s on Wall Street were preaching, he insisted that diversification was definitely not the way to go.
His investment philosophy seemed to go OK.
Cheers,
Dazzling
“Go hard or go home”
Depends on the town, I don’t mind having all my eggs in one basket, I just keep changing the basket.
Byronent
Adelaide SAWarren Buffet invests in companies that he then controls. You can’t control the town so you have no say in its success. I would diversify!
Robert Bou-Hamdan
Mortgage Adviser
http://www.mortgagepackaging.com.auFREE Finance-Related Newsletter – Click Here
Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty LtdAs Byronent said,
it depends on the town, i’ve had up to 18 in one town, and still have 11, better the town you know well, than one you know a little about.Hello – Look at the risk factors affecting your return in that town eg; if the local mine provides all the work and accomadation demand what would happen if it closed down.
regards Ian LakeYes and what if it is not a mining town.
Not every single country town is founded on the back of mines.
You can always get mines life cycles and estimates.
Take Broken Hill, all thought the town would die when BHP and Pasminco abondoned them.
Population around 23,000 3 largest town in NSW and I have never missed a beat rent wise there.
Byronent
Adelaide SAI think Byronent missed the point of my EXAMPLE of a town with a mine.
All Towns have factors that affect their economic wellbeing. Isolate these factors and assess there risk to your investment portfolio.
Refards Ian LakeThankyou, All
For you points and feedback, they have given me some areas to think about when next choosing my Investment direction.
Cheers…Ryan.
Hi all
Ryan, i have always diversified to spead the risk of having all the investments in one town.
Byronent, Broken hill isn’t the 3rd largest town in NSW by a long way. Broken Hill is a classic example of what can happen to centres that rely on one main industry, back in 1997 you couldn’t give away your homes there, some were selling for 25k. In hindsight it was a great buying opportunity but those poor people who had bought there years before when prices were way higher, they were cut to pieces by the decline of the city. In the 1960’s Broken hIll had 30,000 people by 1996 Broken Hill’s population was recorded as 20,963 (in the 1996 Australian census- Australian Bureau of Statistics). It continued to decline with a population of about 20,096 (2001 Census – Australian Bureau of Statistics).
so Ryan i’d take caution and spread the risk.regards westan
I live in New Zealand and for a fee find cash positive deals there, email me at [email protected] to join our database
Hi Ryan,
I am one for diversifying. Prefer to have my properties spread in proven higher growth areas so that I can enjoy the different cycles as they occur.
But having said that – I am aware some people do prefer to focus their energies into one basket. If this is you just make sure the basket is a good one and doesn’t turn into a basket case.
Derek
[email protected]Property Investment Support Available.
Westan
I went and checked my info and yes I was wrong. HOwever I still stand by that particular town at todays pricing for Cash flow positive properties. Rental returns are great, capital gains are terrible.Here is a link for everyone relates only to NSW that I think maybe interesting, as it gives all kinds of stats.
Byronent
Adelaide SAhi Byronent
i don’t want to appear to be saying that buying in Broken Hill today is a bad thing, it may well be a fantastic investment. I just wanted to use that as an example of how things can go bad for a town (at least for a time) and those who needed to sell back in 1997 would have done very badly. If you were buying in 1997 i reckon you would have probably got a smile on your face.
regards westan
I live in New Zealand and for a fee find cash positive deals there, email me at [email protected] to join our database
I too would start diversifying.
In addition to generally being rather dangerous, this will have effects in the future on financing, if your lender suddenly decides that you have too many properties there, they could limit your LVRs reducing the amount of equity available to be withdraw, etc.
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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