While diversifying our properties may seem to make good sense, the question then arises – how should we diversify? Some strategists recommend that we should spread our properties across several States, so that if the market slows down in one State, it may still perform well in the others.
Other advisors tell us to diversify with a mix of different property types in our portfolio, such as houses, townhouses, duplexes and units so that if demand falls for one type of property it could rise for the others.
A few theorists may even suggest that we should combine these strategies by purchasing different types of properties in different States, believing that the more our properties are mixed by type and location, the lower the risk becomes.
These sorts of diversification strategies rely more on good luck than on sound research and they can still leave all our properties at risk. More to the point, such random diversification is completely unnecessary right now, because we are at one of those rare moments in history when areas with the best potential can be easily identified.