Property for Life, a property investment consultancy, says less experienced property investors should look to diversify the types of property they invest in to spread their risk and improve returns.
Property for Life says experienced property investors tend to diversify into different property types, tenant types and locations but this is often not the case for investors with less experience.
David Austin, managing director of Property for Life, explains: “Typically, investors with a lower level of experience will make initial purchases close to home because they know the area and prefer to be able to keep an eye on the properties.
“Novice investors predominantly purchase purpose built flats and favour one type of tenant.”
By contrast, experienced investors will diversify on area, property type and tenant type and tend to pick areas with high rental yields and few void periods, according to Austin.
He says advisers with less experienced property investor clients should be aiming to help them diversify their portfolios to achieve better risk-adjusted returns and benefit from economies of scale.
“Diversification in the UK has become associated with investment in different locations, but this does not have to be the case. Novice investors who prefer to purchase in one area should aim to invest in different types of property which appeal to different tenant types," adds Austin.
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