The Intermediary – June 2025 - Flipbook - Page 32
BUY-TO-LET
Opinion
Diversification
isn’t just about
the numbers
I
n buy-to-let (BTL), the word
‘diversification’ gets thrown
around a lot – but most
interpret it to mean owning
a lot of properties. At Fleet
Mortgages, we’ve worked with
investors who hold 15 properties, and
yet they’re arguably less diversified –
and more exposed – than others who
hold just three.
That might sound counterintuitive,
but if all those properties are targeting
the same tenant demographic, in the
same part of town, then the investor
is effectively making the same bet
again and again. It’s like saying you’ve
got a diversified portfolio because you
own shares in five highly specific tech
companies. You’re still reliant on a
single market narrative playing out.
True diversification in property
comes down to three things: type,
location, and time. Get these right – in
combination – and investors are much
beer placed to ride out the inevitable
swings of the market.
Let’s start with property type.
Different kinds of homes aract
different tenants, and behave very
differently depending on market
conditions. Flats in city centres,
terraced homes in commuter belts,
three-bed semis in the suburbs – all
cater for different needs and pressures.
We’ve seen huge divergences in
performance post-pandemic. For
example, the exodus to more space
boosted family homes, while the
return to offices renewed appetite for
central flats. An investor who holds
both is naturally more resilient. One
dips, the other rises. It doesn’t take
clever forecasting – it’s just smart
structuring.
Then there’s location. We tend to
talk about ‘the housing market’ like it’s
one thing, but anyone in this industry
knows how localised things are.
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The Intermediary | June 2025
There are times when Manchester
is surging, while Birmingham pauses.
Regeneration in Liverpool, HS2
offshoots in Leeds, commuter upli in
East Anglia – these aren’t just headline
trends, they’re practical signals
that opportunities and risks vary
enormously by postcode.
Helping spread your client’s
portfolio across different regions
doesn’t just protect against downturns,
it also helps them capture upsides
when other areas stall.
Perhaps the most overlooked
aspect of diversification is time. Most
property investors aren’t buying 10
properties in one go, they’re building
steadily, one acquisition at a time,
based on when they’ve saved a deposit
or spoed the right opportunity. They
might not realise that this patience is
an advantage. By buying at different
points in the cycle, they’re naturally
averaging out their exposure.
One property might have been
bought in a seller’s market at a
premium; another might have
been snapped up in a downturn at a
discount. It smooths out peaks and
troughs and takes a lot of the emotion
– and guesswork – out of the equation.
You benefit from a broader exposure
to the full cycle, and over time, the
returns tend to level up.
Method not madness
I always say the market rewards
methodical investors – the ones who
take their time, do their homework,
and build their portfolio thoughtfully
across different places, property types,
and periods.
Right now, we’re seeing more
landlords think strategically about
yield and tenant demand, especially
as the regulatory landscape tightens.
The upcoming Renters’ Rights Bill,
for instance, introduces limits on rent
LOUISA RITCHIE
is national account manager
at Fleet Mortgages
increases and tighter eviction rules.
Investors who are overextended in one
high-cost area, banking on aggressive
rent rises to deliver returns, may now
find themselves squeezed.
Conversely, landlords who
diversified into houses in multiple
occupation (HMOs) or multi-unit
blocks (MUBs) – and who understand
the rules around licensing and Article
4 directions – may find themselves
with a stronger yield cushion.
We’re seeing rising interest in this
segment of the market. In recognition
of the complexity involved, we’ve
recently put out a comprehensive
HMO guide to help advisers and
clients navigate the planning and
compliance landscape confidently.
At the same time, we’ve continued
to adjust our product range to reflect
where demand is heading. For
example, recent cashback offers on
our HMO and MUFB products are
designed to support landlords with
upfront costs, which are typically
higher for these types of properties.
Those details maer, especially when
margins are tight and borrowers are
under pressure to make deals stack.
All this circles back to the original
point: success in this market isn’t
about the number of properties.
It’s about building a portfolio that’s
resilient, responsive, and aligned
with market realities – not just
market hype.
This is the conversation you should
be having with your landlord clients.
It’s not just about sourcing the next
mortgage; it’s about supporting a longterm strategy that works – whatever
the market throws their way. ●
