Why diversification is now imperative for landlord clients – Berry

by: Jason Berry, group sales director at Crystal Specialist Finance
  • 02/07/2024
  • 0
Why diversification is now imperative for landlord clients – Berry
We're operating in an ever-changing financial landscape, and it's become essential for UK mortgage brokers to encourage their landlord clients to take action and diversify their property portfolios.

With market dynamics shifting and new challenges emerging, the diversification of asset classes can provide stability and growth opportunities for investors.

But it’s essential that this diversification takes place in conjunction with full consideration of both energy-efficiency improvements and the rising demand in the private rental sector that’s occurring amid increasing homelessness and affordability challenges.


Diversification is key

One of the most effective strategies for mitigating risk and maximising returns is diversifying asset classes.

Landlord clients who solely focus on residential properties may be missing out on lucrative opportunities in commercial, semi-commercial, multi-unit blocks (MUBs), houses in multiple occupation (HMOs) and holiday lets.

By spreading investments across different asset classes, landlords can reduce their exposure to market volatility and enhance their overall portfolio performance.

Mortgage brokers play a crucial role in educating their clients about the benefits of diversification and helping them identify suitable investment opportunities.

Whether it’s investing in commercial properties for stable rental income or exploring the potential of holiday lets for higher yields, brokers can provide valuable insights and guidance to help clients make informed decisions.


Energy efficiency consideration crucial along with diversification

In addition to the diversification of asset classes, it’s essential for landlords to consider energy-efficiency improvements in their properties.

While the government has yet to enforce legislation regarding Energy Performance Certificates (EPCs), proactive landlords can gain a competitive edge by investing in energy-efficient upgrades.

Mortgage brokers can advise their clients on the potential cost savings and environmental benefits of implementing energy-efficiency measures such as insulation, double glazing and energy-efficient heating systems.

Not only can these upgrades enhance the desirability of the property for tenants, but they can also future-proof investments against potential regulatory changes.


Rising demand in the private rental sector

The demand for rental properties in the UK continues to rise, driven by factors such as increasing homelessness and affordability challenges in the owner-occupied market.

According to the Organisation for Economic Co-operation and Development (OECD), the UK has seen a significant increase in homelessness, with 43 people per 10,000 affected in 2023.

In this context, landlords have an essential role to play in providing safe and affordable housing options for tenants.

Mortgage brokers can highlight the opportunities in the private rental sector to their clients, emphasising the potential for steady rental income and long-term capital appreciation.

By encouraging landlord clients to diversify their portfolios and consider energy-efficiency improvements, mortgage brokers can help them navigate the evolving property market landscape and seize opportunities for growth.

Moreover, by addressing the rising demand in the private rental sector, landlords can contribute to alleviating homelessness and meeting the housing needs of UK residents.

Proactive action is now essential for landlord clients to thrive in today’s dynamic property market.

Through the diversification of asset classes, considering energy-efficiency improvements, and meeting the rising demand in the private rental sector, landlords can position themselves for long-term success.

Mortgage brokers play a crucial role in this process by guiding their clients through these strategic decisions – and helping them achieve their investment goals.

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