Portfolio diversification strategies for landlords in 2024
- 29th January 2024
- Buy-To-Let Property News
Buy-To-Let advice to succeed and minimise risk
Whether you are a new or existing landlord you will be considering how to build your business and property portfolio. But in a cyclical market, you’ll also be looking at how to minimise your risk, especially considering the increased costs faced by both you and your prospective tenants as mortgage rates and rental prices have risen. Portfolio diversification could be a good option to better protect your investment by spreading the risks and better enabling sustained success as a landlord. So what strategies should you be considering?
Spreading investments across property types and geographic locations
The old adage of not putting all your eggs in one basket holds true here. You may want to concentrate on one property type or location to make things easier, however, spreading your investment across a variety of property types and geographic locations could help you to better cope with changing markets. These different locations and property types will likely deliver different yields, spreading your risk more broadly. If one is underperforming the other, multiple properties can help to balance it.
As part of your growth strategy, you’ll also be considering your investment goals. Are you looking for a long-term reward of capital appreciation or a more immediate cash flow that allows you to cover your expenses and provide you with an income?
By combining elements of both strategies, you also spread risk. So, for instance, for a longer-term strategy you might be looking to invest in up-and-coming areas where the future potential is more lucrative, such as Canada Water. Meanwhile letting properties that are close to city centres, such as in the City itself, transport links and other sought-after facilities such as good schools, think Dulwich for example, will provide a more immediate source of lucrative rental income since these will be snapped up quickly and are likely to offer higher rental yields.
Consider other tenant types
In the same way that it’s tempting to stick with what you know in terms of property type and location, you may also want to focus on the same tenant type. But here demand also shifts. Broadening your target market by considering a wider tenant pool, perhaps by starting with a focus on residential properties but later considering student accommodation, could also be an option. You may also want to consider other shorter-term lets such as vacation rentals. However, bear in mind that these are different markets with different needs and challenges, so be sure to do your homework or to get support from managing agents with expertise in these areas.
Know your market
Understanding your markets, the conditions impacting them and keeping up to date with the latest news and regulatory changes is also important. This expanding knowledge will ensure you are better prepared for change but also able to quickly identify and snap up new opportunities. It will also help you identify the best time to sell or refinance when looking to maximise your ROI.
Stay on top of things
As you diversify your property portfolio while you are spreading your financial risks you are increasing the complexity of your portfolio’s management. Keeping on top of your finances and reinvesting profits where possible; choosing the right tenants; using technology and related services to better manage your portfolio and using the professional management services of experienced lettings agencies to help you source the right properties and tenants and manage them effectively, can help to ensure that your property diversification is a success.
At ludlowthompson we are experts in helping landlords develop and expand their buy-to-let property portfolios and offer a range of services to help you understand the London market. This ranges from comprehensive buy-to-let investment guides to support for the professional management of your portfolio, as well as access to leading buy-to-let mortgages that include deals you won’t find elsewhere. Get in touch with an expert at your local branch today to find out more about how we can help. We offer a range of services and promise to deliver maximum performance, communication and trust for the London market.
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