CASE STUDY: Diversifying a Property Investor (Malcolm)

Malcolm was deeply suspicious of financial advisers and any investments outside of property. Over the years he had built up a portfolio of residential property and one commercial property. He had always done most of the management and maintenance himself.


Recently some poor experiences had him looking around for alternatives.


The tenant of his commercial property had gone into liquidation owing rent. Malcolm took a loss on the rent owed. In addition the tenant had damaged the flooring and the property needed a big refit before it could be leased again. In all the property was untenanted for three months.


One of his Auckland properties had appreciated a lot but the tenants were complaining that the basement was damp and Malcolm knew he would have to spend a substantial amount sorting out the drainage.


At age 66 Malcolm wanted to retire and take his wife on a long overseas holiday. He wanted a more hands off investment strategy.


Malcolm was referred to Alistair Pirie at Saturn Portfolio by his accountant.  Although property had been good to him over the years he found that he had lots of assets but not the income to match. Additionally his investments were illiquid and undiversified. It was clear that Malcolm would not be able to retire without selling at least one property as he did not have other savings and what he accumulated seemed to be ploughed back into maintaining the properties.


After looking at the diversification available in a Saturn investment portfolio Malcolm agreed to make an initial investment of $330,000 in early 2012. He began cautiously, using a moderate to balanced risk profile. Following strong early net returns Malcolm rationalised his property portfolio further and invested another $200,000. He liked the fact that his portfolio includes several Australasian and Global listed property investments. These were likely to show similar returns to directly held property over the longer term but with more liquidity and less stress for Malcolm.


Through working with his adviser Malcolm has improved his knowledge and understanding of financial markets to the point where he now feels comfortable with a Balanced Growth risk profile. He understands there will be periods of market volatility and some periods of negative returns but he will always have defensive, liquid assets in his portfolio to draw on to fund his lifestyle.

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