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How to invest in property without buying bricks and mortar

Investing in property has a long history of good returns, after all it is no secret that the value of land in the UK has increased over time. However, property investment does come with its downsides. It generally requires a lot of hard work; whether that be research, negotiations, legislation or physically developing a property, […]

Danielle Wilde

Danielle Wilde

April 19th, 2018

Investing in property has a long history of good returns, after all it is no secret that the value of land in the UK has increased over time.

However, property investment does come with its downsides. It generally requires a lot of hard work; whether that be research, negotiations, legislation or physically developing a property, it’s not for the faint of heart.

Combine that with the recent introduction of higher stamp duty on buy-to-let properties and it’s hardly surprising that a survey from the Council of Mortgage Lenders revealed more landlords are intending to decrease their property portfolios rather than increase them.

Luckily, there are ways that you can invest in property without going through the hassle of purchasing bricks and mortar. Here at Propio, we take a look at a few of the options when it comes to investing in property in a non-traditional way.

Property Funds

Property funds are typically collective investment schemes where money from separate investors is pooled together into a single fund and used to make investments. Usually, these funds are structured as limited partnerships, with fixed holding periods where investors cannot access their money. These funds are typically handled by a manager or management group that earns money through fees and taking a share of profits. As the name suggests, these funds are often, well, private and usually only open to institutional and accredited investors with large minimum investment thresholds over long (5 year+) time periods.

REITs

Real Estate Investment Trusts (REITs) were introduced in the UK in 2007 to provide a more accessible and tax efficient way to invest in UK property. REITs, unlike many other property investments, can be easily traded on the stock exchange – exactly the same as any other share – making them subject to stock market fluctuation. They also tend to be large portfolios, so investors have some form of built-in diversification.

In order to qualify for REIT status, at least 75% of a company’s profits must come from property rental income (not property development), and 75% of the company’s assets must be involved in the property rental business, which generally means commercial assets. REITs must also distribute 90% of their property rental income to investors which makes them an attractive option for investors looking for income. In 2017, REIT’s in the UK typically returned between 3% and 6% per annum.

If you want to know exactly what you’re investing in, shares in REITs are often purchased directly through a stockbroker – an avenue usually reserved for sophisticated investors. Alternatively, if you’re not fussed about visibility of your investments, you can invest indirectly through a collective investment scheme or tax wrappers such as ISA’s or a Self-Invested Personal Pension (SIPP).

New technology platforms

Over the last few years, new platforms have started emerging that are making property investment more efficient, often meaning lower fees, higher returns and increased transparency. As the fintech sector grows, more and more investors are moving to online platforms that give them more control over the investments they are making and how they are spreading their money.

As one of these companies, Propio was set up to create a new property finance marketplace. We have leveraged technology to allow people access to private property markets online with carefully selected property development and lending investments across both residential and commercial. We allow you to choose exactly where your money goes, offering an average return of 8.1% per annum which is 7 times higher than the average cash ISA return of 0.93% in 2018.

Conclusion

Property investing is no longer limited to buying bricks and mortar. Consumers have a wealth of different options which can be personalised to your investment preferences. No matter which route you choose, take the time to read all the facts and select a way to invest which makes the most sense for you and your financial objectives.

 

 

 

Danielle Wilde

Written by

Danielle Wilde

April 19th, 2018

You could lose all of your money invested in this product. This is a high-risk investment and is much riskier than a savings account. ISA eligibility does not guarantee returns or protect you from losses.

You could lose all of your money invested in this product. This is a high-risk investment and is much riskier than a savings account. ISA eligibility does not guarantee returns or protect you from losses.

This website is directed at and intended to be used only by those persons categorised as Self-Certified Sophisticated Investors and High Net Worth Individuals. By proceeding, you confirm that you fit into one of these categories. The material on the website is for general information and should not be regarded as an offer or invitation to invest. Only investors who qualify are eligible to invest. If you are unsure of your categorisation, please consult an independent financial adviser.