If you think there are limited ways to make money from property - such as owning a buy-to-let or letting out your holiday home - you are in for a surprise...
Property investment doesn't have to be restricted to traditional buy-to-let or holiday lets, there are innovative ways to enjoy potentially eye-catching long-term profits from bricks and mortar. Here we outline five…
1. Stocks and shares
You could opt for stocks and shares within a property fund. Also known as collective funds, these spread your money between a range of companies in a big pot, along with other investors’ cash.
The fund size grows or shrinks depending on how many investors are buying and selling it, with the hope that over the long-term your investment will ride out any market lows to produce juicy returns.
But bear in mind that traditional property funds mainly find focus on commercial properties, such as retail parks and office blocks. The fund may earn returns from rental income paid by businesses, or interest earned on a bridging loan, for example, on commercial property for sale.
You can pick from property funds focused on the UK or expand for a global reach. But if you’re new to the world of investing, make sure to do your research, and that you hold a wide range of investments.
Typically, you’ll pay fees of between 1% and 1.5% a year for a fund, with a manager in place to make decisions on your behalf.
Another option is to invest in residential property funds through Zoopla partner Bricklane.com. It offers a slice of the buy-to-let market in major UK cities – and you can invest as much as you like, starting from £100.
You can pick from the Regional Capitals fund, focused on Leeds, Birmingham and Manchester, or there’s a London fund that invests in property in the capital.
Bricklane.com offer standard and pension (SIPP) accounts, but there’s also a Property ISA if you’ve yet to use your £20,000 tax-free ISA allowance for the 2018/19 tax year*.
Investing with Bricklane.com takes away the burden of being a landlord, as you don’t have to invest in properties yourself, maintain them, or keep tenants happy. Investing through an ISA or SIPP (pension) is the most tax-efficient way to invest in UK residential property* with returns earned from rental income, and capital growth.
3. Buying to do up and sell on
It may be tempting to buy a property, and make some major changes to pocket a chunk of profit when you sell on. But this isn’t a simple way to invest without experience in the property market.
Check that it’ll be worth the time and effort involved to do whatever works you have planned. You don’t want to spend months renovating a property to find it’s impossible to sell on or isn’t worth what you thought.
This option requires plenty of research and patience. It’s also vital you don’t borrow more than you can afford on the assumption you’ll make the extra costs back – especially given interest on repayments will clock up if the project is delayed.
Make sure you also have all the required paperwork, such as planning permission, before you start work. You want to ensure the sales process goes smoothly when the time comes.
4. Holding property in your pension
If you’re keen to invest in property to provide for retirement, there are a growing number of options.
You can invest from £10,000 in a Bricklane.com fund if you’ve got a self-invested personal pension (SIPP).* Put simply, this is a do-it-yourself pension which enables you to choose your own investments.
If you invest more than £25,000 in Bricklane.com through Hartley Pensions, you won’t pay a penny in SIPP set-up or ongoing costs. These usually come to £125 plus VAT for the set up fee, alongside an admin charge of £175 plus VAT.
*Tax rules apply, and these may change – and like any investment, your capital is at risk.
You’ve probably heard of peer-to-peer because it’s an increasingly popular option among savers battling a low interest rate environment. There are lots of providers on the market that bring two parties together, one to lend and one to borrow.
Peer-to-peer may involve lending to individuals, businesses or even residential property investors. The idea is that you invest via a special online platform to cut out the middleman – traditionally, a bank or building society – and receive a higher return on your cash.
Providers such as Landbay lend your money to residential property investors in the form of buy-to-let mortgages, and you may invest from a minimum of £100.
Whatever sum you invest is sliced up and spread across various loans. The greater the risk of the individual borrower, the higher the return on offer, but your risk is spread as loans are secured against different properties.
You can choose different terms for your investment, from 12 months to between three and five years.
Bear in mind that your money is not protected under the Financial Services Compensation Scheme (FSCS). Instead, peer-to-peer providers have a reserve fund in place to safeguard against bad debts not being met, and you being left out of pocket.
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As with all investing, your capital is at risk. Tax rules and allowances depend on individual circumstances and may change. Your investment may go down, as well as up. Although the shares are listed, if you want to sell them, there is no guarantee that you will find a buyer within a timeframe, or at a price, acceptable to you.
This article does not constitute financial advice. If you are unsure about whether investment is right for you, you should seek independent advice before investing, including tax advice.
Zoopla Limited is an introducer appointed representative of Gallium Fund Solutions Limited (Reference number: 487176) which is authorised and regulated by the Financial Conduct Authority.