What is diversification?
To diversify your investment portfolio means to strategically spread your money across a variety of projects, companies, and assets. The purpose of diversifying is to achieve a more balanced portfolio to help alleviate risks and cushion the impact that fluctuating conditions in markets and prices may have.
Another way of describing diversification is through the common phrase: don’t put all your eggs in one basket.
The exposure to multiple assets means that, if one devalues, only a fraction of your portfolio will suffer as opposed to its majority. The idea behind this is simply to reduce risk by ensuring that your portfolio is never dependent on a single asset at any one time – if one investment depreciates, another may increase in value, giving you a more stable effect.
How could diversifying benefit you?
· Mitigate impact
One of the key aspects that investors find attractive about diversifying their portfolio is the balance of assets and investment types, which ultimately helps ease the impact of any market changes.
It’s a good idea to have exposure to a range of markets or assets, helping build on experience and confidence as an investor.
Having a diverse portfolio offers the flexibility of taking advantage of positive changes in various markets, so you’re not constantly banking on benefitting from only one asset.
· Multiple revenue streams
The luxury of having several income sources can help investors achieve their financial goals.
· Sector diversification
Diversifying within the property sector is possible, so if you’re already invested in a certain segment such as buy-to-let, you can easily diversify your portfolio by investing in the hotel sector.
Different property types
If you’re a Buy-to-Let landlord, one way to diversify your portfolio is to introduce a mix of property types. For example, if modern city apartments already make up a part of your portfolio, you could consider residential homes. Not only would this diversify the types of properties themselves, but also your target market, which would expand from young professionals to families. This way, you’d be able to appeal to a broader range of tenants and service a larger scope of demand.
Another approach could be to broaden your residential properties by size. If your portfolio already contains 4-5+ bedroom homes, you could think about adding 2 or 3 beds to meet higher demands.
The estate agency Andrews Property Group reports the below popularity in home types in the UK by bed count, showing that 3-beds are by far the most common.
The report adds that semi-detached properties account make up over 30% of housing stock, followed closely by terraced homes.
Expanding your property types and generating multiple revenue streams, means that you are able to meet higher demands, service a larger target market, and any void periods in one asset should be less damaging than if you were to have just a single property.
A variety of locations
Trying to predict market changes is volatile, but diversification could help you be better prepared for them. When the Covid-19 pandemic erupted in 2020, businesses all over the world turned to working from home following the new government guidelines. This led to the fall in demand for office spaces and gave office workers the opportunity to relocate to rural areas and cut back on rent costs.
The UK’s number one property portal Rightmove recently reported that, in January and February 2021, Cornwall overtook London as the most searched location by home-seekers, adding that the gap between searches for Cornwall and London dropped to just 3%, which fell from 24% in 2020 and 49% in 2019.
While London is still proving to be in high demand, countryside locations like Cornwall and Devon are not far behind.
As the uncertainty of the pandemic remains and demand changes among tenants, the property market continues to go through its ups and downs, so covering a range of locations as a Buy-to-Let landlord could be a good way to be prepared for that rollercoaster.
Diversifying in property – why now?
In the UK, the financial climate has been rocky (to say the least) over the last couple of years. We’ve seen living costs surge to a 10-year-high, and the housing shortage crisis intensify as a result of Brexit. So, why choose to expand your property portfolio now?
One of the UK largest property agents Savills makes the above 5-year predictions for the growth in house prices – they are forecast to rise by over 21%. Rightmove also foresees further growth as prices are expected to rise by 5% this year.
So, with house prices increasing steadily, this may be a good time to consider expanding your property portfolio.
Diversifying with Propiteer Capital
Propiteer Capital PLC fund property developments across 5 asset classes: residential homes, private rental apartments, hotel and leisure facilities, commercial offices, and essential utility infrastructure. Assets are spread across in-demand and up-and-coming economic regions in the UK with high margin returns or robust income streams, and in Ireland, providing Brexit-resistant developments.
Propiteer Capital are also a proud strategic partner of world-class hotel brands Hilton and Marriott, offering established and world-leading hospitality services. This includes the prestigious Hampton by Hilton Imperial War Museum in Duxford, which will offer opportunities for tourists and visitors of Europe’s largest air museum, and the urban Moxy by Marriott, which will transform Belfast’s Cathedral Quarter.
Other projects include the Clondalkin town centre redevelopment, bringing a bold vision to Dublin with over 1,000 modern apartments, and Brizes Park, offering luxury renovated homes to a prime commuter town in Essex.
Propiteer Capital’s range of development projects gives investors the opportunity to diversify their property portfolios in an easy and convenient way via bonds, which are listed on European Stock Exchanges. The assets we fund are carefully sourced based on projected profit opportunities and scrutinised for risk, profitability, and potential, offering asset-backed security to your investments.
For high net-worth and sophisticated investors, we offer 3 investment options, all of which come with fixed rate returns of 4.75% to 9.10% per annum and exit options from 1 to 3 years, and investors can get started with a minimum of £5,000.
To find out more about Propiteer Capital listed bonds or to see an example income plan, visit our website.
Rates are accurate at the date of publishing. For our latest rates, please visit our homepage.
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