With a great choice properties for sale, first time buyers being unable to save enough for large deposits and more tenants looking for rented accommodation than for over a decade, now is a great time to become a landlord, but ensure you do so wisely and carefully as mistakes are common. Not spreading and not creating a well balanced portfolio, is one of the most common mistakes I have come across with landlords over the last 20 years, because they hadn’t been given the right advice or simply didn’t know that advice was out there.

You may be right to assume that as you have bought a property which rents out very quickly and easily that it makes sense to duplicate this type of unit/area and model. When this gets let just as quickly, many feel they have the winning formula and so do it again and again thinking they are on to a good thing.

This may well be the case short term, and you could continue on with these investments for a few years, whilst they remain trouble free, but you cannot see what the future holds, so caution is necessary.

All sorts of changes can occur that can effect a rental property, for example new roads can be built, areas can become flood plains, ruining an area, major employers could shut down, the family from hell could move in, a certain category of housing could be regulated against or become victim to oversupply or suddenly the lease holders employ the service of a new management company to oversee the apartment block in which your investment units are located and decide to enforce a clause that forbids you from renting out all of your units in that one block.

This happened to a landlord I know, she had created an investment strategy of her own that for several years had worked very well, buying all of her 2 bedroomed flats in one block, but suddenly she faced having 6 vacant un-saleable units all in one block due to the restriction to let being enforced, which meant no means of getting income from them.

In additions to the management company issue, the flats were in a 1970’s block with metal windows which had traditionally always rented well. However, the market was now flooded with modern trendy ‘City living’ luxury apartment blocks with en-suites and canal side views, which meant that theses flats were now not renting well at the previous rents, meaning plummeting returns and difficult to sell or rent.

Unfortunately this meant that when she did finally resolved the consent to let issue, at great costs, her entire portfolio was a lot less attractive and achieving much lower rents than before, thus affecting her returns and due to the oversupplied flat market her future capital appreciation went through the floor, if she had balanced out her portfolio with a few houses, different flats in different blocks etc, she would have been saved from this situation.

Spreading your risk does not just extend to buying all your properties in one block. Avoid buying into any one particular “market”. Across your portfolio you should have a spread of areas (even if all within your local area), property types, i.e.: flats/houses/HMO’s etc and markets for example don’t invest all your money in HMO’s or student lets or LHA. The government has a great habit of introducing “regulation” into particular sectors, and if all your portfolio is wrapped up into one sector, then this could leave you with major problems in the future

Above all you have less “risk” exposure, by spreading your portfolio across different rental types and markets/areas. Some landlords want to buy properties cash, without mortgage. This can be one of the riskiest strategies of all. If that property is empty, it is now costing you money, or if any of the above issues affect that property, like it becomes a flood plain area, then you may lose everything. You would in most cases benefit from splitting your money, utilising mortgages and buying 3 or 4 properties instead. Therefore if one is empty, the remainder are still covering your costs and appreciating in value.

If you want to enjoy your investment career, please make sure you get the best advice and speak to someone who understands property investment and your local area, your letting agent should be able to help you.  Do check out different area’s for future planning, check out online about local crime rates and ensure you employ the services of a qualified charted surveyor to ensure the property you are about to purchase is of sound construction.

If you look at your property purchases as an IFA would a balanced financial portfolio, taking into consideration, your desired outcomes, financial returns expected and your attitude to risk and the time you want to be involved in property, then your property investing be will be something you enjoy, and remain a pain free ‘safe and secure property portfolio’, but remember to review it every few years as things change.