As the UK property market, like any asset class, continues to change, it is vital that property investors adapt in order to continue to make the most from their investments.
For investors, diversifying your portfolio is one of the best ways to maximise your returns, as well as offset and minimise the risk of having all your eggs in one basket. While it is vital to tread carefully and do thorough research before embarking on a new investment, there are a number of ways within the property market that money can be spread as the shape of the housing sector in the UK continues to change.
1. Geographically
One of the top strategies for property investors is to spread their investments across different geographical locations, as different parts of the country perform at hugely variable levels. Staying ahead of the next emerging market is one of the best ways to see the most from your money and spread your level of risk.
While the obvious choice for housing investment in the past has always been London, with rocketing house prices providing surefire capital appreciation in its heyday, it is clear that London’s property market has now begun to fall flat. Although good investments can still be made there, many are opting to divest their least profitable assets and relocate their funds elsewhere, with cities such as Manchester, Liverpool, Birmingham, Leeds and even smaller areas such as Preston all offering greater returns.
2. Property type
The tried and tested buy-to-let model has altered significantly in recent years, with landlords being faced with stricter lending rules and tax changes, and this is changing the sector for some smaller, accidental landlords. As such, many investors are now considering a wider range of property type away from the “vanilla” buy-to-let.
The build-to-rent sector has seen a huge rise which is set to increase even further, and is now more open to individual as well as institutional investors – with off-plan investments in particular offering good returns. HMOs (houses in multiple occupation) are another high-yielding property type, although they are a more expensive form of investment at the outset and require more management. Other investors opt to diversify away from residential towards commercial space, which is a sector that has been picking up particularly well in northern cities recently.
3. Crowdfunding
Still a relatively new form of investing in the property sector, crowdfunding is attractive to many as it can be done with relatively small amounts of capital, and you can invest in either debt or equity. There are now many platforms that offer the opportunity to invest in property crowdfunding, such as Crowdlords, Property Moose, The House Crowd and UOwn.
Your money goes towards funding a property or project without having to deal with the ownership side of bricks and mortar. In equity crowdfunding, once enough cash has been raised by investors, the property purchase is completed and the investor becomes the shareholder, receiving a portion of the rent and capital growth. As the capital initially required is normally quite low, investors can diversify by backing a number of different projects or peer-to-peer lending, spreading their assets.
