Diversification secret to success in property investment
It was late November in 2005, and Dan and his wife saw what they thought would make a good holiday gift to themselves within a year or so. They picked out a condo they liked, that seemed like it would return a handsome profit in short order.
After running the numbers over and over for the next few weeks, they convinced themselves that they had made the right decision. So they bought three more virtually identical condos in the same location.
I was telling Dan’s tale to Connie, my friend and a real estate investor. “Once you convince yourself that you have made the right decision,” said Connie, “it is natural to try to multiply that.”
In one condo association I studied, at least four couples made the same move that Dan and his wife did. They each bought four condos. Others bought three of the same; still others bought two of the same. Now there are 48 of those you-can’t-miss-with-these condos on the market at the same time.
Similar investment strategies showed up all over the place when I started looking. That doesn’t mean they won’t be good purchases for others. It does mean that the buyers in this market might want to choose a different investment strategy.