Could a diversified property portfolio bring success?

 
Could a diversified property portfolio bring success?

Investing in property can be a complicated business and there is plenty of options for those wanting to benefit from the market. Therefore, many investors decide to stick to what they know, but there could be options to diversifying into new areas to maximise returns.

For example, figures suggest the stock of rental property in the UK in the private sector is worth £1 trillion, with the student letting market a strong growth area – over the last three years more than £2 billion has been invested.

Options for diversifying

Within the residential property sector, there are a number of options. Some investors opt to focus on small one-bedroom flats to young professionals, while others may prefer to rent out larger houses to families.  However, having a mix of assets could be the best way to ensure strong returns.

By spreading the risk, the changes are landlords are less susceptible to changes in the market. For instance, the recent changes in stamp duty liabilities could mean more young renters are able to afford to purchase rather than rent a home - possibly leading to a decline in demand and occupancy of flats. By having a diverse portfolio, any such changing market conditions means negative impacts are less significant.

Don’t take too many risks

Equally, it is a good idea not to spread investments across too many sectors. Research is always key to any investment and investors need to feel comfortable with the risks by being aware of any potential downsides. If something sounds too good to be true – the chances are it is.

Be an active investor

It is often assumed that investing in property will eventually bring returns in the long-term, but taking a more active approach to the sector could result in greater success.

For example, keeping track of rental yields against capital gains could be the way forward. For example, if you have bought stock that suddenly sees a strong rise in its value, you need to be aware of it so you can put it to market rather than holding onto it. It lets you make the most of an upturn in the market before any potential fall.