Why diversity can be an important card to play when investing in property

Why diversity can be an important card to play when investing in property [Photo: apomares via iStock]

Property investment has become a big thing in the UK in recent times. A few years of positive growth in the market without threat of another bubble, the growth in demand for rental property, rising student numbers and the fact property has proved a healthier asset class than things like stocks and shares and gold, has meant a growing number of investors, both UK-based and from overseas, turning to property.
But it's important to remember that although lucrative - it has seen returns of up to 17 per cent dependent on sector in recent years - the property market is not straightforward in its nature, and can be a difficult one to handle if you don't know where is best to invest and what tactics to employ. 

One of the little known tactics, for example, that savvy property buyers have been turning to in recent years has been the diverse property portfolio. Sure, we have 5.4 million rental homes nationwide thanks to demand, and more than £5 billion per year being invested in student property alone as the need for stock climbs, but even if one area of the market is performing as well as these two currently are, it's a good idea to not put all your eggs in one basket. 

Buying in a number of different types of property - commercial, rental and student, for example - can be hugely beneficial. Those with a long-term investment strategy will see the positives in capitalising on growth wherever it comes while also protecting your portfolio somewhat against falls in certain sectors. 

Spread the risk

One of the biggest positives of employing a more diverse strategy when it comes to investing in property is the fact that you protect yourself against the potential for any crashes in the market. For example, in the current climate, commercial stock has seen a real fall post-Brexit. 

For those with all their money in commercial property, this would be a disaster, with the value of their portfolio falling spectacularly. However, those with a more diverse strategy to their investment will be able to ride the waves, with the positives in other stock helping to cushion the blow of losses in commercial property.

Reap the benefits

While the biggest benefit of investing in property diversely is the fact that you are often protected against falls in certain sectors, it's also true that you can gain hugely from the gains in certain sectors without having to compete and follow the crowd, should you have taken this tactic on board. 

For example, if there is a sharp rise in demand for rental property at one point of the year, investors will start to head towards this type of stock and competition between buyers will heat up, meaning prices rocket, putting a dent in your returns. 

However, for those who have already put their money into a range of different types of property, this will not be a problem. When certain areas of the market pick up quickly, diverse portfolio owners know that they are well placed to capitalise without having to make any major changes, which means lower stress and the chance to make a higher return straight away.