Buy-to-let may be dead in the water for all but cash-rich buyers, but there are still ways to invest in property even if you don’t plan to live in it — with some investments possible for as little as £1.
A number of new initiatives are emerging while some older ones are getting a new lease of life. Here are five under-the-radar ways to become a property investor.
CapitalRise allows people to invest in loans secured against prime real estate in Chelsea, Belgravia and Kensington. Using an online platform, investors can choose the loans that they want to participate in, based on location, risk, project duration and rates of return.
All investments are structured so that capital is underpinned with a legal charge over the property and CapitalRise monitors each project throughout the life cycle of the loan, taking away the hassle usually associated with property investments.
The minimum investment is £1,000 and there’s no upper limit, but investors need to be either self-certified sophisticated investors or high-net-worth individuals who earn £100,000+ a year or have more than £250,000 in net assets.
Since CapitalRise’s inception in 2016, the average rate of return on matured investments has been 8.3 per cent pa.
The buyer then pays a monthly rent to the investors and the percentage monthly rent you receive is equivalent to the percentage of the property that you own.
You own a share in this property and pay stamp duty accordingly. Additionally, should the value of the property rise (or indeed fall), so too will your investment. The investor is neither a landlord nor investing in buy-to-let and will not have to deal with any maintenance issues.
The minimum investment is £2,000 and while you can invest in as many properties as you like, there is a limit on how much you can invest in a single home.
You can sell your percentage at any time as long as you give the homeowner first refusal. Your return will be dependent on how your property performs but, with this scheme, you aren’t just investing in property, you’re also helping people to become homeowners themselves.
The London House Exchange
As the name suggests, this is the world’s only fully regulated exchange for property shares.
You can buy property shares for as little as £1 in rented-out student and residential properties and trade them through the exchange. All costs are factored in, and you get a share in the equity.
Just like traditional shares, you’ll receive a dividend on your investment and the value of the property will increase or decrease over time, so each return is different.
Ahead of investing, the platform gives you a huge amount of information, including the rent received, service charges and the cost of the mortgage, and properties are diverse types and locations.
There is no minimum or maximum period that you need to hold onto the investment for and the only issue with selling is there needs to be a buyer. The platform aims to allow people to buy property in a hands-off way, without the hassle of being a landlord.
Real Estate Investment Trusts
A Real Estate Investment Trust, or REIT, is a company that owns, operates, or finances income-generating real estate.
“Think of REITs as a property company that focuses on property rental and distributing rents to shareholders as dividends. Unlike most forms of property, they are traded on the stock market like a share, so they can be easily bought and sold,” says Lawrie Chandler, director at Edale.
REITs can include non-residential, such as warehouses and retail, too. REITs can be purchased on the London Stock Exchange so there is no minimum investment, but, for practical reasons, an investor will need to use an investment platform or stockbroker in the purchase.
One way to invest in a REIT is in a stocks and shares ISA. The big advantage of this over a standard REIT investment is that it is tax free.
“You won’t have to pay income tax on the dividends you receive each year, nor will you have to pay capital gains tax when you sell the REIT in the future,” says financial coach Vicki Munro.
You can regularly review your portfolio and make adjustments, but you’re limited to an annual investment of £20,000. Property ISAs can also be accessed at any time.