Taking a diverse approach to business, whether through your team, strategy, or investment mix, has consistently proven to reduce risk and enhance returns. In a sector as illiquid and nuanced as property, landlords increasingly recognise diversification as a key strategy to protect and strengthen their portfolios. For mortgage advisers, this opens up a valuable opportunity to lead those conversations and add long-term value.
In the current climate, diversification is fast becoming a necessity. Advisers who can support clients in rethinking their portfolios are well placed to uncover new borrowing needs, strengthen relationships, and support more sustainable investment decisions.
Regulation is one of the key forces driving change. The Renters Reform Bill, expected to pass later in 2025, will usher in a significant shift in the private rental sector. The proposed abolition of Section 21 ‘no-fault’ evictions, combined with tougher standards around property conditions and enhanced tenant protections, will create a more stable environment for tenants. However, these changes may also make it harder for landlords to manage arrears or regain possession of their properties.
This increased tenant security adds another layer of risk, especially for those with smaller or highly concentrated portfolios. For example, a landlord with four single-let properties who loses one tenant experiences a 25% drop in income. In contrast, a landlord with ten or more units is better protected.
Mix for a better result
Diversification today means far more than spreading investment across postcodes. Advisers should be ready to discuss the wide range of ways landlords can balance and de-risk their holdings. Property type is one route. More landlords are exploring options such as houses in multiple occupation (HMOs), holiday lets, and multi-unit blocks. These formats can often offer higher yields and help reduce voids when tenant demand shifts.
Others are experimenting with different tenancy models. Blending long-term rentals with short-term lets or corporate tenancies can help landlords smooth out income flows and appeal to a broader range of tenant profiles.
There is also a notable trend towards stepping outside the residential sector altogether. Many landlords are now considering commercial and semi-commercial investments, motivated by the opportunity to tap into new markets, access more attractive yields, and reduce exposure to residential-only risk.
A lean towards commercial
High-quality commercial space, particularly in smaller towns and local centres, is in short supply. Demand is growing for flexible offices and retail spaces that serve the needs of communities now working closer to home. As hybrid working continues to reshape where people spend their time during the week, landlords are responding to changing demand.
This shift is creating genuine investment opportunities for landlords who are open to diversifying into commercial or semi-commercial spaces. It also provides a new avenue for brokers to add value. Unlike standard buy-to-let cases, commercial finance requires a more structured approach. Landlords rely on advisers to help them navigate unfamiliar territory, identify the right lender, and present the application effectively.
Connecting the dots
To encourage diversification, brokers need to take a proactive role. Many landlords will not consider changing or expanding their portfolio strategy without a prompt. That prompt might come during a refinancing conversation, an annual review, or when discussing the implications of new regulation or interest rate shifts.
Helping clients think through basic scenario planning can be an effective entry point. Demonstrating how their income might be affected by a void period or a single arrears case can be enough to show the benefit of scale. Comparing the impact of rate rises on a portfolio with a single income stream versus one with multiple, varied tenancies also reinforces the case for spreading risk.
Lenders are increasingly aligning their product ranges with the needs of portfolio landlords. At LHV Bank, for example, we offer multi-property finance, combined with flexible underwriting that accounts for mixed-use properties and complex ownership structures. Brokers who understand how to present these cases can unlock significant opportunities for their clients.
The key is partnering with lenders who truly understand this market. Those with experience in semi-commercial or specialist lending, or who take a broader view of a landlord’s overall position, are often better placed to support diverse strategies. These partnerships are invaluable for advisers working with more ambitious or professional landlords.
A shift in mindset
Diversification should not be seen purely as a defensive move. It is also a forward-looking growth strategy. Landlords who explore new sectors, locations, and tenancy models are not just managing risk. They are uncovering new revenue opportunities and building businesses that are better prepared for regulatory and economic change.
Diversification is about more than weathering the next market shock. It is about building resilience, unlocking opportunity, and future-proofing investment strategies.
Brokers who lead this conversation now will position themselves as essential partners in an ever-changing property market.
