In a surprising turn of events, the latest inflation figures reveal a slowdown in the rise of consumer prices. According to the Office for National Statistics (ONS), The Consumer Prices Index (CPI) sat at 4.6% in October, down from 6.7% in September.
One of the best reasons for investing in property is the potential financial returns. But what if you can’t commit to hands-on investments? We have outlined some of the alternative property investments.
Certainly, with the average yield for buy-to-let at around 6%, you can earn a lot more with your money than to have sitting it in a bank or a building society, earning a mere 1 or 2% (which is the average interest today).
If you invest in a HMO a few years down the line and it’s likely you will have an even higher yield, possibly in double figures. Admittedly, you’ll have to do quite a bit more work for your buck, but many property investors feel the returns are more than worth it.
Benefits of Investing in Property Rentals
In addition to just the ongoing rental income (which you can use as cash flow), an additional benefit is the potential for capital growth. To the extent it’s not uncommon for a property to double in value within a decade or two. Last year, for instance, the average property grew by around £20,000 (or 8.2%). That was according to figures by the Halifax, and which brought the cost of the average home in England to £272,992.
Property prices can also go down as well as up, of course, dependent upon market conditions. However, with demand for housing far outstripping supply right now (and which is looking to be the case for at least the next decade), the chances of this happening should be reduced.
Property Refurbishment Strategy
Property investment doesn’t have to be about buy-to-let and rental income though. Another popular strategy is to buy a run-down property and refurbish it, to then sell on. It’s possible to make a significant profit within a relatively short amount of time. This very much depends on the skills of those involved though, as well as the ability to find the right property in the first place.
Investing in REITs
Investing in real estate investment trusts (REIT) is far more hands-off than those already mentioned. This is a property investment company listed on the stock exchange. You can buy shares in the company’s pre-selected property portfolios. In this way investors are pooling their funds to invest in buy to let or property to sell. Profits made are then shared with investors, based on the size of their ongoing investment. This type of investment can be very tax efficient, compared to other forms of investment.
Yet another form of property investing, and one which is a clear alternative to either rentals, refurbs, or REITs – is peer-to-peer lending.
Peer-to-peer lending is a way for people to lend money to individuals or businesses. You – as the lender – receive the projected interest along with your capital, when the loan is repaid.
This type of platform allows investors to choose their own properties (or at least, the properties they would like to invest in). In this sense it gives the investor far more independence that a REIT offers.
Benefits of Peer-to-Peer Lending
- Offers much higher returns than a high street bank or a building society.
- Offers a range of different providers.
- Minimum loan amounts at a level which enable those interested in property investment to partake with little capital.
- Being online, a peer-to-peer lending platform is easy to access, meaning investors can check their projects and profits at any time during the day or night.
- Investors are able to diversify their risk across a range of investments / providers.
A disadvantage of peer-to-peer lending is that your capital is at risk and this type of platform isn’t covered by the Financial Services Compensation Scheme.
Peer-to-Peer Lending with Sourced Capital
We have our own peer-to-peer platform at Sourced, where investors can get started with a minimum investment of just £1,000.
Our targeted return on investment is up to 12% per annum, which is made up of the standard rate of 10% per annum, with an additional 2% with a pledge of over £20,000.
70% is the maximum loan to gross development value (LTGDV) we offer to our borrowers, and we provide first legal charge security against every property, in addition to a personal guarantee from the borrower. As an investor, you will receive both capital and interest, upon satisfactory repayment.
It’s possible to switch any existing ISA account you may have to our Sourced Capital Innovative Finance ISA (IFISA), at no charge.
Capital at risk. FCA regulated. Not covered by the FSCS.
Property Investing with a Pension
Similar to the IFISA, investors can benefit from tax free returns by using either their SIPP or SSAS pension funds. Contact either your pensions scheme administrator or Sourced Capital for further details.
Right now, the Sourced Group have property in development, across the UK, totalling more than £270m, including flagship developments in Manchester with more than 500 apartments. We also have more than 150 offices with individuals sourcing, investing, and managing property portfolios the length and breadth of the British Isles.
Start your property investing journey by creating an account with Sourced Capital. Register Here
Capital at risk. FCA regulated. Not covered by the FSCS.
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