"Have you got a recent success story?" It's a question we get asked a lot, and one client keeps coming to mind. He was based in Western Australia, in a Perth market that was, in his own words, booming and out of control, and he wanted to add to his portfolio with around $650,000 to spend.
He already had a couple of buy-and-hold properties in Perth. That's not a bad problem to have when your home market is booming, but it is a concentration problem. Everything he owned was exposed to the same city, the same cycle, and the same risks if that cycle turned.
The first thing we did wasn't look at listings. It was analyse his existing portfolio and work out what it actually needed, not just what market was currently hot.
What he needed was to increase the risk profile of his portfolio slightly, in a deliberate way, not by chasing a hot market but by adding an asset type he didn't already hold. We found him a property here in Hobart, sub-$650,000, with a strong yield around 5%, on a large land size, close to facilities and close to the waterfront.
"We bought him something that had a strong yield, about five percent, but on a large land size, close to facilities, actually close to the waterfront, for sub six fifty, that he could develop over the long term."
David Zerna, Client Success StoryThe land size was the key to the whole strategy. It gave him the option to develop the property over the long term, potentially adding one or two dwellings to the rear using equity he'd already created in his Perth properties. That's a very different kind of asset to another straightforward buy-and-hold in a market he was already heavily exposed to.
A strong yield pays the bills today. Land size and location buy you options for tomorrow. For an investor who already owns straightforward buy-and-hold property, the more valuable addition to a portfolio is often the asset that gives you a second lever to pull, not another version of what you already own.
It would have been easy for him to just keep buying in Perth while the market was running hot. Instead, diversifying his geography, and specifically choosing an asset with development upside rather than another passive hold, was the smarter move for where his portfolio was at. He's already made equity in the short term on the purchase, on top of the long-term development potential still sitting ahead of him.
Concentration risk. Owning multiple properties in one booming city means your entire portfolio is exposed to that single market's cycle. Diversifying into a different city, especially with a different asset profile like land size and development potential, spreads that risk.
The combination mattered more than any single factor: a strong yield around 5%, a large land size with genuine development potential, and proximity to facilities and the waterfront, all for sub-$650,000.
In this case, the client used equity he had already built in his existing Perth properties rather than a fresh cash deposit. Every investor's finance position is different, which is exactly why we start with a portfolio review before looking at listings.
This article is for general information purposes only and does not constitute financial or investment advice. Individual results vary and are not a guarantee of future performance. Please consult a qualified financial adviser before making any investment decisions.
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