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Alternative Routes to Property Investment

Written by Posted On Thursday, 04 August 2016 16:00

In order to invest a property, you need to buy a property. That's what most people assume, at any rate, and at first glance it seems like a very common-sense assumption. However, there are a few alternative ways to invest in the property market, which don't involve personally buying a property. These offer a number of advantages that many investors will find attractive, including much lower outlays and the ability to invest in a more hands-off manner than becoming a landlord would entail.

Property Crowdfunding

This is one of the most recent alternative property investment concepts, and offers a route to invest in potentially prime properties with relatively small amounts of money. With crowdfunding, you do actually buy a property – or rather you buy a small share in a property along with a large number of other investors. The property is then let out for a set period before being sold on, and all returns are split between investors in proportion to their original investment. A number of online platforms have sprung up giving access to crowdfunded property investment, and the key advantage is the chance to invest as little as £500 into the property market and access returns proportionally similar to those enjoyed by full-fledged landlords.

Property Funds

Another alternative way to get involved in the property market is to buy shares in a property fund. Your money will then be pooled together with the money put up by other investors in the fund, and a professional fund manager will then use that money to invest in a portfolio of properties. The manager takes a fee for his or her work managing the fund, as well as the market expertise that it takes to select properties effectively. On the face of it, this looks similar to crowdfunded investment; both involve pooling your funds with those of others and buying a share of a larger investment. There are certainly resemblances between the two, but also differences. The presence of a professional manager to look after your money is one. Another is that you are buying shares of a diverse and, to some extent, flexible portfolio rather than a single property, and this tends to carry a lower risk profile.

Peer-to-Peer Lending for Property

Peer-to-peer (P2P) lending is an alternative investment that has become quite popular of late, even earning government approval of sorts through the announcement of what essentially amounts to a specialist ISA for P2P. Essentially, this is a separate kind of investment from property, with investors offering their own funds to individuals and businesses who wish to take out loans. However, one sub-sector of P2P intersects with property: mortgages. Specialist P2P platforms offer a route for people to invest in peer-to-peer lending, where their money is used to fund property loans, particularly for buy-to-let investors. While this is still in many ways a different animal from other property investment methods, even alternative ones like coworking space investment, care homes or student property, lenders have their loans secured against a property, benefit from property boom periods as demand for mortgage lending grows alongside demand for property, and effectively receive a proportion of the rent the property generates through repayments with interest on the loan.

For more information about alternative ways to property investment, please contact Hopwood House.

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