Why a diverse portfolio is key to property investment success

When you purchase property, it can be incredibly tempting to “stick to what you know”. However working alongside thousands of property investors, at Benoit, we have seen that those who have the most consistent performance are those who choose to diversify their portfolio – choosing a range of properties which suit differing demands, and often have different objectives when it comes to revenue stream. 

The Covid Effect 

If the global pandemic has taught us anything, it’s that putting all your eggs in one basket is not a key to success. For example, landlords who had previously relied on short term lets in either busy cities or high demand tourist areas saw the demand switch off almost overnight.

Conversely, as tenant behaviour changed, demand for out of city properties by coastal locations or in the countryside hugely increased.

Combined with red-hot housing markets across the globe, investors with a number of varied units were able to make the most of some of the quickest property price increases we have seen for decades. 

Shifting economic sands 

While of course huge events such as the Covid pandemic or the financial crash of 2008 will always have a huge impact, at a more local level, there are a number of factors which can affect the performance of your property investment, therefore it is wise to spread your risk (and reward).

For example a relocation of a major employer within a location can quickly change the demographic, while the redevelopment or a major regeneration project can have mixed results – it may bring a larger population to a location, but may also impact in terms of liquidity as competition becomes fiercer. 

Keeping your revenue stream consistent 

When you invest in real estate, it is key to look at your short, medium and long term goals. While high yields will bring in immediate income, it’s important to look at your longer term goals too.

A property investment can become a liability, so it’s important that you review the stock within your portfolio regularly and react to changes.

By having a more diverse range of properties in ownership, you give yourself more freedom, and, realistically tend to have more objectivity than if you have “bet hard” on a specific development, location or property type. 

How to diversify your property portfolio

A diverse portfolio can mean something different to every investor and what suits one individual may not for another. For example, you may choose to have a collection of properties across the globe. Or focus on a single city – but with completely different objectives – for example a mixture of long term let apartments, student accommodation mixed with some family homes.

You may focus solely on holiday rentals, but with a portfolio spanning different continents. 

Or you may have a mixture of objectives – the high rental yielding properties, combined with those which have the best scope for capital growth.

There is no “right or wrong” however by undertaking indepth research and properly ascertaining your goals, you can create a property portfolio that will provide you with the lifestyle you want.

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