Investing in property is seen by many as a safe bet compared to other alternatives. However, this isn’t always the easiest way of going into the investment game. You’ll need to come up with 20% of the value of the property you’re trying to buy and also qualify for a mortgage on the rest. There are also other expenses that come with buying property such as stamp duty. Running the rental property can also incur some costs. You may have to pay an agent and pay for the cost of repairs. You’ll also have to pay taxes on the rental income and with the tax relief all but scrapped, there’s a lot of these to pay.
However, you can still invest in property without actually owning any property or being responsible for the property. In fact, there are several ways of doing this.
This is a system that is used to connect borrowers and lenders through an online platform. The process is relatively easier since no banks are involved and the potential returns are also quite high. You can invest your money through peer-to-peer providers such as Landbay who loan the money out to people looking to invest in buy-to-lets. You can invest as little as £100 and as much as you want. The loans go to many different properties and this reduces the risks in case a borrower defaults. However, you should still invest cautiously. In this type of investment, your money isn’t protected as much as it is in a bank and you won’t know for sure the type of borrower your money is going to.
This scheme is still in its infancy but the potential looks good. Through a provider such as Bricklane.com, you can put in some money (£100 minimum) which will then be pooled together with other investors’ money and held in a unique fund. The funds are used to purchase buy-to-lets in major cities in the UK and the value of your investment will be increasing with rental income and also from the property values when they go up. You will not be paying taxes on the amount you receive from the account up to a certain upper limit since the account is ISA eligible.
Property funds are still new so you’ll want to do some research on these first. They are basically open ended investment companies (OEICs) or unit trusts that invest in property. These allow you to invest in a type of property you’re interested in but can’t invest in on your own.
These funds have shares that investors can buy and their money is then pooled together with that of other investors. The cost of shares will rise and fall depending on how the fund is performing. A fund manager is in charge of investing the funds in ways that they believe will bring the most returns. They can do this by buying and renting out office space, industrial units, warehouses etc. The property could be local or in other countries depending on the fund.