How to Build A Diverse Property Portfolio

How to Build A Diverse Property Portfolio

Last updated 23rd July 2018 • JaeVee MarketingJaeVee

Diversify, Investment, Portfolio

When it comes to having a successful investment portfolio the old age phrase of ‘don’t put all your eggs into one basket’ springs to mind.

Diversification reduces the risk from the market's slumps, over time the market will diverge from being in more or less benefit of your assets. That is to say, the more diverse they are, the more partial the impact of a slump will be to your overall portfolio. 

Not only does diversification reduce risk, it creates more opportunities to take advantage of the market, growing your portfolio in a shorter period of time as opposed to fully depending on one outcome at a time.

How to build a diverse property development and investment portfolio?

Here’s a summary of the main avenues you have to develop a diverse portfolio:

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Location

When you start out investing in property it is likely you will do so close to home in the area you live in.

Whilst this is advisable for first timers as you become more experienced, investing in property in different areas will help diversify your portfolio and bring a number of benefits too.

Investing in capital cities, and up and coming areas away from home will mean property and rent prices are likely to higher.

This means that the rental yields they are likely to bring in will maximise your returns.

Properties in different cities and regions will all come with their own price bracket so do your research and see where you can invest in to gain exposure to a different type of market.

This is a great way to diversify your property investment portfolio.

Throughout any investment there will be upturns and downturns so diversifying your portfolio is a great way to protect you against any big financial implications. Explore what opportunities can be found:

Property type

  • Holiday homes such as villas - which can be let out all year round and you gain exposure to a international tourism.
  • Houses with multiple occupancy (HMO’S) –a large house made into multiple rooms which mean multiple rental yields from the occupants.
  • Commercial property – less competition than residential and cheaper which means better returns on investment and often overlooked. 
  • Real Estate Investment Trusts- offer common shares to public on property/ mortgages and real estate investment diversification.
  • Social and affordable housing- adds social value to an investment and profitable.
  • Serviced accommodation - full furnished ‘home away from homes’ usually managed similar to a hotel.
  • Off plan properties - new build developments not ready for tenants to move in, you buy and wait for them to be ready.

Niche, purpose-built developments

Here are some examples of how to be more competitive than regular HMO’s in appealing to different kinds of tenants:

  • There’s a high volume of students that apply to live on campus. Mainly because of the proximity but second to that is the formation of close friendships and an active social life offered by shared living. Ideally, a student wants to live close to the university in a property that has great shared living spaces, spacious private rooms with an ensuite. However, this is pretty upmarket and beyond the budget of a lot of students, so there’s room to compromise on amenities and location, even a direct bus route can generate more interest. 
  • We’re in an aging generation, so the demand for retirement communities is on the rise. Simple touches like waist-high sockets, grab bars and wet-room style bathrooms can can aid the lifestyle of the elderly who still have their independence.  
  • There’s an increasing demand for young professionals looking to co-live with like-minded people in a property that has great shared living spaces. The rental price will be determined by how upmarket and centrally located the property is, this will dictate the calibre of tenants you attract.   

The hand you play

If you have a heavy hand in a project or you’re focusing on your career and can’t take time out, you can still expand your property portfolio and churn a profit out of the market in a light-hand manner. 

Infact, some light-handed strategies can generate a higher-return than you can achieve by yourself. 

For example, when you use a joint venture property investing platform, your equity is pooled together with several other investors’, this gives you access to the higher-returns of the primary market.

Joint ventures also incur less risk, as you partner with experts, you can expect a professional process of due diligence and an experienced team to seamlessly get through every phase of the development.

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