Before you even consider a property investment, you should read our ultimate guide on how to invest in property.
There are many ways you can access the property market. You do not need to buy a property outright yourself, as that will only be an option if you have significant capital in the bank for a deposit. There are other ways, you can also invest in a crowdfunding scheme or loan money through peer-to-peer lending. Sometimes you can invest as little as £100 in those schemes.
Each option is not without its own obstacles. We discuss the pros and cons of investing in property through a company vs. as an individual, crowdfunding and peer-to-peer lending.
How to invest in property
Before making an enquiry to a property, have you considered whether you want to buy a property or explore the other ways you can invest in property?
There are many ways to access the UK property market. We will briefly explain how to invest in UK property and outline some of the advantages and disadvantages of each:
Buying a property
There is an age old saying that an Englishman’s home is his castle. Meaning that a person has control of what happens in their own home. Many people prefer to buy the actual property, the brick and mortar (as some people say) for the sense of security that they feel from owning the legal title.
Having been active in the property industry for more than 11 years and working with a lot of overseas investors from Hong Kong, Middle East, South Africa, Israel and Russia, we are absolutely aware that investors don’t just buy property for the investment returns. They like the idea of having a foothold in another country and having something tangible, like property.
If you are looking to find out more about the UK property purchase process or the differences between the freehold and leasehold ownership, our property investments guides will help empower you with the knowledge you seek.
One can find suitable investment properties via online auctions, property portals, estate agents – like One Touch.
Buying shares in a listed property company
The typical available on our website requires a minimum investment of £60,000. If you do not have that sort of budget, then purchasing shares in a listed property company may be a way to access the property market with less capital. The London Stock Exchange has over 50 listed property companies and REITS. Just like when choosing a property, you would have to conduct your due diligence on the sector and the specific company.
It is easy to get it wrong, as there are lots of changes that can take place. For instance, a change in trends has resulted in a significant downturn in the fortunes of retail investment companies. Shopping centre owner, INTU has gone into administration. If you owned shares in that company, you would probably have lost all your capital. Whereas – when you own a buy to let property – even if the market demand goes down, you still receive the rental income and with all-time low interest rates, you will certainly be able to maintain the mortgage payments. Buying shares in property companies which focus on healthcare have been more resilient. One such company is Primary Healthcare Properties (PHP). It pays a dividend of nearly 4% from leasing doctors’ surgeries to the government.
UK investors buy shares via online investment platforms like AJ Bell or Hargreaves Lansdown can benefit from tax savings when they invest through their ISA or SIPP. Overseas investors can also set up International Trading Accounts but some of the overseas platforms only have a limited selection of shares to invest in.
Buying shares in REIT
A REIT is an abbreviation of Real Estate Investment Trust. Shares can be purchased.
More Risky Property Investment Options Include:
Crowdfunding
Generally, you would provide equity towards a development for a share in the profits. The risk profile makes it only suitable for sophisticated or high net worth investors. The higher risk means you could also achieve higher returns; if the developments works out as expected you could achieve between 11% and 18% returns. However, you could also potentially lose all your capital invested because you would sit behind the creditors if the developer went bust.
Peer-to-peer lending
Is slightly less risky than crowdfunding in most instances because provide the loan to a developer and take a first charge on the property. That way, they have access to the assets in the underlying property. With the lower risks come returns between 4% and 6% per annum.
You can invest as little as £100 into Peer-to-peer lending platforms. With peer-to-peer lending, you would earn interest on the loan and the capital is repaid upon completion of their project.
The main difference between crowdfunding and peer-to-peer lending is that with crowdfunding you own the equity (the property), and with peer-to-peer lending you are loaning money, so you own the debt.
Conclusion
Property is a non-liquid asset and during tough times you may not be able to sell your shares or you property. However, there is a good steady income on offer and some capital growth opportunities that will provide handsome returns for medium to long term investors.
Do you like the sound of the traditional route and the simplicity of – the bricks and mortar? This is where One Touch can help you with your property search. Helping to find the best property to match your investment and lifestyle goals.
