Property Types

There are many property types that can be invested in – residential, commercial, industrial, development and retail. All these categories respond differently in the varying market conditions which is why seasoned investors will diversify their real estate investments across a number of these to spread their risk. This allows the investors to ride the “real estate cycle” of recovery, expansion, hyper supply and recession as each property type goes through this same cycle but at different times and speeds.

Within the property types there is also further scope for diversification for example within residential – be it student accommodation, houses of multiple occupation, private rentals or vacation rentals. All of these types within residential property perform in very different ways with different risk vs rewards.

KAPITL will initially be focusing on residential and development properties however in the future will also be expanding into commercial and retail. Typically a real estate investment requires a large capital sum to be outlaid at the outset so to be able to diversify across property types requires quite considerable capital sums. This is where KAPITL can help! Investors will be able to diversify their real estate investments by property type with much less capital sums required.

How is that possible?

Investors on KAPITL can diversify their real estate investments by property type with much lower capital requirements through various innovative strategies. For instance, they can join a syndicate to pool funds with others, allowing a group of 50 investors to contribute £20,000 each to acquire a £1,000,000 commercial property, providing access to significant assets without the full financial burden. Additionally, an investor could target emerging markets by investing £50,000 in fractional shares of several properties, such as a multi-family residential building and a small retail space in up-and-coming neighbourhoods like Birmingham or Sheffield. Another example is that with £75,000 an investor could acquire fractional ownership in a vacation rental property and a city apartment catering to business travellers, thereby diversifying their rental strategies. There are plenty of opportunities to enable smaller investments in various developments; with £20,000 in a student housing project and £30,000 in a mixed-use facility. Specialised properties such as assisted living facilities could also be an option; with £60,000 allocated to both student housing and senior living projects. Finally, an investor with £300,000 could purchase fractional shares in properties across different regions such as £100,000 in London, £100,000 in Spain and £100,000 in Canada, ensuring broad geographical diversity. These strategies empower investors to engage in real estate with reduced capital requirements while achieving a well-rounded portfolio across various property types and markets. With KAPITL’s business model it also allows investors to benefit from returns on their investment as soon as the investment is made – they do not have to wait for the whole property to be sold.

KAPITL has fractional ownership available for each property type listed on KAPITL’s Platform. This means for the capital outlay of one residential property you could actually diversify your portfolio to having, for example, 25% of 2 residential properties and 50% of a development property. The investment capital is the same however your investment would be diversified and therefore the investment risk is lower whilst having increased potential for returns on investments.

Geographic Diversification

Geographic diversification is a strategy used by investors to spread their investments across different geographic regions or countries. This is because the property market performs differently across different geographic regions – be that different regions within a certain country and also worldwide.

Geographic diversification aims to balance the risk and reward by reducing the impact of market fluctuations and economic changes thereby offering a more stable investment with a better growth potential. Geographic diversification avoids excessive concentration in any one market.

For example in an article recently published by Savill’s it shows how in the first quarter of 2024 the Northern regions in England saw the most growth in house prices being 2.3% in the North East and 1.6% in the North West.

By taking geographic diversification across different countries it allows investors to reduce the impact of any one country’s economic or political events thereby protecting them from their investments taking a downturn in any one market. It also allows investors to take advantage of the different economic cycles and growth rates by investing in a variety of markets.

When real estate investments are spread across different countries it also allows investors to diversify their exposure to different currencies which can help to protect against currency fluctuations and reduce the impact of exchange risk on their portfolio.

KAPITL will initially be focusing on offering properties for investment across all regions within the UK which allows real estate investors to diversify their portfolio fractionally across many different regions. In the future KAPITL plans to expand into Europe and worldwide which eventually will allow the investor to diversify as geographically as they please.

Vehicle and Strategy Diversification

There are many different ways to invest in real estate – different investment vehicles and structures all have their pros and cons. Investors need to think about how they want to acquire the real estate investment and what they are looking to gain from it. Some investors wish to maximise tax benefits and others wish for something more liquid. By creating a mix of these strategies, investors are able to diversify their portfolio to be able to manage their priorities.

Real estate investment strategies typically range from low-risk and low-return investments to high-risk and high-return investment. By investing in a mix of profiles across the spectrum the investor is best positioned to balance out their returns and potentially generate a stable income with stable returns over the long term.

For example if an investor has solely invested in residential real estate with private rentals then it would be worth considering diversifying into some short term rental properties along with debt strategies or commercial real estate. Residential real estate typically provides reliable steady income with a relatively attractive rental yield. However, short term vacation rentals allow investors to maximise their income whilst the area is seasonally popular or the area is particularly attractive to tourists so therefore receive a much larger rental income when calculated monthly. The downside to this is, of course, seasonality, travel trends and any political situation that may arise in the country or location of the holiday rental.

KAPITL provides investors with strategy diversification as well as vehicle diversification. KAPITL will offer properties that are suited to long term private tenants, holiday rentals, houses of multiple occupation and student housing alongside commercial real estate, development sites and also debt strategies.

The structure of KAPITL’s offered investments ensures that liquidity is always a priority, KAPITL’s goal is to make real estate a more liquid asset. Investors are able to spread their risk with less capital outlay through the structure of KAPITL’s real estate investments whilst also diversifying geographically, strategically and through property types – it is a win win situation!

Risk Diversification

Risk diversification is an overall investment strategy that aims to reduce overall risk by spreading investments across different asset types, industries, geographies and asset types. It helps manage risk by avoiding over-reliance on a single investment sector. The aim is to balance the risk and reward and such approach reduces the risk of impact of market fluctuations and economic changes which offers a more stable investment experience and better growth potential.

Diversification in real estate investments is easily achievable by purchasing income-producing properties of different types, sectors, geographic locations and through different strategies and vehicles – each of which have been comprehensively outlined above.

KAPITL is well placed to help investors in diversifying their portfolios. Take for example an investor has £300,000 to invest. Typically this would allow the investor to buy a family home for a private family rental (looking at the UK average house price).

What could the investor do with £300,000 on KAPITL’s Platform?

With £300,000 on KAPITL’s platform an investor can strategically diversify their real estate portfolio in several impactful ways. They could allocate funds to fractional ownership such as investing £150,000 in five residential properties across different cities, enabling exposure to various rental markets. Alternatively, they could invest £100,000 in a mix of commercial spaces like retail units and office spaces, generating stable income from established businesses. For those looking to tap into luxury real estate, pooling resources to acquire shares in high-value assets, such as a luxury apartment in London and a premium vacation home is also an option. Geographic diversification can further mitigate risk with investments spread across cities like London, Edinburgh and Cardiff, as well as international properties providing exposure to global markets.  Investors might also consider trading shares to control larger portfolios or participate in real estate development projects. Additionally, focusing entirely on short-term rental properties could cater to the growing demand in the vacation rental market. Overall KAPITL empowers investors to maximise their potential returns while effectively managing risk through a variety of investment strategies.

The investor could put £100,000 into the typical family home in Leeds (thereby owning one third of the property, assuming that the cost was £300,000), £50,000 into owning part of a flat in London which is rented out to students, £100,000 into owning part of a development or commercial building and £50,000 into debt financing.

The investors’ £300,000 will see much larger diversification with the opportunities that KAPITL present for investment on KAPITL’s platform than traditionally would be available to investors. This puts the investor in a much stronger position to be able to “ride” the real estate cycles and balances out the risk vs reward.