Property Investing Tip - Diversifying Your Property Investment Portfolio

Many larger investors will invest in numerous and a variety of, asset classes, and this is also advised for property investors. Diversification is a good way to help mitigate risk, and to maximise your returns. When starting out many property investors will stick to strategies and areas they know; this is not a bad thing to do, initially. But as you grow your portfolio, it is advisable to learn new strategies and become comfortable with new locations to help unlock ways to grow your money, to capitalise on different growth models, but also to curb against local market fluctuations and downturns in the economic landscape.

For example if your portfolio consists of one type of strategy in one location, lets say, short term lets, and suddenly a large number of new developments are built close by, saturating the local market with STLs, you will suffer, over time from decreasing occupancy levels, decreasing nightly rates from competition, and a decline in your overall NET yield.

So consider:

1. Buying properties in different areas - if you are unsure then do some research, speak to local experts and do your due diligence. Look for reasons to invest in certain areas, such as university towns and cities with good retention, so you have students and young professionals. Look for areas ideal for tourism, or corporate lettings with strong business ties

2. Consider different investment strategies - buy-to-let, short term lets, furnished holiday lets, social housing, HMOs, property flips, commercial, commercial to residential

3. Buy different property types - Apartments, terraced houses, semi-detached, detached. There are pros and cons to each property type, apartments for example can suffer from low capital appreciation over time but appeal to younger professionals and work well for short term lets. Houses with gardens appeal to families with children. Bungalows appeal to the older generation and retirees. Mix up your portfolio with both old and new properties, new for less maintenance, old for character, appeal and the potential to add value. 4. You should invest in different price points, which can help to cover appeal to different demographics, depending on type and location.

Growing a successful property portfolio means to understand the potential future risks and diversifying helps to mitigate those risks substantially.

Final tip is to review your portfolio from time to time. Make sure you have a complete understanding of every property and the income and expenditure of each property in the portfolio, making sure they are all performing at the highest level they can, this is YOUR money after all!

This article is intended for informational purposes only and does not constitute investment advice. Property values can go down as well as up, and past performance is not indicative of future results.