Property Investment Diversification

Property Investment Diversification
April 12, 2018 Brickowner

Reducing Your Risk

Property investment diversification is an important consideration given no one can predict the future (avoid like the plague anyone after your money who claims they can), any money you invest is going to be at risk. One of the main ways anyone can reduce the inevitable economic cycle of up and down is to spread the risk and invest in different assets. These could be shares, property, gold, oil futures or more esoteric fungible items such as art, classic cars or top end shotguns. The important thing is not to have all your financial eggs and thus future security in one basket.  By all means, move them around to suit your ever-changing life situation and perhaps emphasize certain investments more heavily at certain points in time. But never forget to keep the bulk of your investment diversified.

As far as property, how do you balance out an investment portfolio? There is a multitude of options and in reality, the initial breakdown is utterly down to individual choice. Be it by sector, geography, usage. All of these are useful and sensible starting points to break down and spread your risk.

Geography and Type of Property

The two most obvious starting points are geographical and type of property; ie residential or commercial (to keep it simple at this point). Your first starting diversification is either to split the country into a basic north/ south divide (unless you wish to think bigger on a UK/ abroad type division). After that initial split is made you can then consider where the investment emphasis in those geographical areas could lie. You may wish to invest more heavily in commercial property in the south of the UK and residential or perhaps HMO type properties in the north.

Given the current attractiveness of commercial property, you may wish the weight your investment in favour of commercial property. Within commercial property, there are many industries you can spread your risk over. You could invest in high-grade industrial storage in the south of England to take advantage of Amazon and other internet oriented company’s growth whilst looking to office and, say, non-standard commercial property such as care homes in the north of the country. The diversity of that selection will allow even this sub-division of your investment strategy to ride out all but the worst economic situation.

A different way of starting the diversification of your property investment is to start with the very type of investment vehicle you place your money in. You could place a certain amount of money in actual (or direct) property ownership, either completely by yourself or through a crowdfunding aggregator site such as Brickowner. Then balance it out with an element of indirect investment through vehicles such as Real Estate Investment Trusts (REITS) or property investment funds.

In truth, there are so many ways to balance and diversify your investments it can come down to individual taste and appetite for risk. If you spread your investment portfolio over shares, a small amount of commodities, tax free ISAs up to your allowance, property split by usage and geographical area and then perhaps a small amount of something quirky, fun and fungible such as fine wine or spirits (and if it all goes wrong that means at least you can have a drink …) Then you are making a start on protecting yourself from the financial ebb and flow. And actually enjoying how you break your money down for your future investment and growth.

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