This paper aims to understand how private landlords approach asset allocation in the Scottish private rented sector (PRS). It explores the extent to which landlords conceptualise their investment holdings as portfolios, identifies how they approach diversification and portfolio building, and examines what drives these approaches.

The research finds that, while most landlords hold assets beyond the PRS, less than half view these as forming a portfolio, and few apply the structured asset allocation and diversification strategies suggested by normative theory. Instead, many rely on intuitive accumulation, gradually acquiring assets as opportunity and circumstance allow. Portfolio neglect is common, with landlords holding multiple assets but failing to manage them as a unified portfolio. Despite some diversity in investment holdings, many appear to have concentrated exposure to residential property, raising questions about the ability of landlords to withstand housing market shocks and respond to evolving policy and regulatory developments.

The findings highlight the need for policymakers to move beyond rational models of landlord behaviour by acknowledging the role of heuristics and biases in landlord decision making, and accounting for mixed levels of financial literacy and financial resilience amongst PRS landlords when designing sector policies. Furthermore, policymakers could support the stability of the sector by providing training, support and behavioural nudges in these areas.

The paper provides the first empirical examination of the asset allocation practices of private landlords in the PRS, viewed through the lenses of normative investment theory and behavioural finance, as well as real estate and housing studies perspectives. It also introduces the concept of “intuitive accumulation” to explain how landlords build investment portfolios over time.

Please reach out to Dr Andrew Robert Watson if you would like to discuss the paper and the findings in more detail.