London Property Investment: What are your options and how to diversify
What’s the most common advice that you’ve received as far as your wealth management goes? I’m sure you’ve heard it all before but it’s true, don’t put your all your eggs in one basket.
That’s right. Spreading your investment across various financial asset classes is sage advice. As your portfolio grows, your income diversifies and so does your risk. But, remember this, if you invest smartly, you can enhance your investment and hedge against rising inflation.
So as an investor, have you thought about property investment in London? Property investment is still one of the top five asset classes that generates a decent income and diversifies your investment options. For example, you can buy a residential property or commercial property and invest in property development.
Look, even if you don’t have the kind of capital required to make that investment you can still look at Real-Estate Investment Trusts(REITs), which are funds used solely for investing in property options.
The key to wealth management and financial planning is thorough research and strategy. Real estate is no different, and with the right information, you can get started with your property portfolio. Here are some things that you should consider:
Finding the Right Property
Many people opt to invest in residential or commercial property and buy-to-let someone else. This can be a profitable investment but you need to be prepared for long-term investment and growth.
Houses are a relatively stable, long-term investment even if the property market fluctuates. You can make a good profit if you decide to sell off the property at some point.
Renting out your property will allow you to pay a mortgage and also provide you with an additional source of income if you choose a low buy-to-let mortgage rate. You can also offset some costs against taxes.
Within buy-to-let, there are many options form corporate-buy-to-let, and serviced accommodation models.
Investing in Property Development
Property development is not everyone’s cup of tea, but if you have the aptitude for it you can earn a handsome return. The rising trend of home buying has, in fact, led to a rise in property development for investors.
However, if you are thinking of investing in property development, you should know that the risks can offset the rewards and sometimes you need to be a more cautious investor.
You can buy a new property and sell it off at a higher price. The trouble with this is that it may not go as planned or expected. The property may not develop to your expectations or the developer might go bust. Also, you may sometimes face difficulty selling it once it is completed. However, if you are a canny investor, you can find a cheap investment and make a reasonable profit by renovating the property.
Don’t have enough capital for any of the above? Then, you can start small by lending on a Peer-to-Peer (P2P) lending platform that invests your money in Buy-to-Let mortgages at a fixed or tracker rate and makes a regular monthly interest from the borrower’s repayments.
The P2P platform directly connects the investor(that is you!) to the borrower using an online marketplace. P2P platforms are authorized by the Financial Conduct Authority and you can make a decent profit if you play your cards right.
Property ISAs (Individual Savings Accounts) are similar to shares and stocks ISAs but the cash you invest is pooled together with the cash from other investors and is held in a REIT fund. This is then used to purchase buy-to-let homes in UK cities.
Your investment grows along with the value of the properties and as a bonus, you also receive rental income on the side. Since the account is a valid ISA, your income and capital gains are tax-free.
This can be a great solution if you are looking for tax-efficient ways of saving money and want to start out with property investment without actually having to buy a brick-and-mortar property.
Property ISAs are fast becoming a popular option for London property investment.
Developer loan notes
Developer loan notes are gaining more momentum among investors as a high-return investment option. This is because the investor acts as a bank here, lending the sum required to the developer to be repaid with interest.
It is a viable investment vehicle because you stand to earn anywhere between 8% and 15% interest within the first year itself, with the possibility of bonuses in the following years.
Loan notes are also ideal for those investors who are looking for shorter-term investments. You are repaid your capital investment when the developer loan notes reach their maturity date.
Generally, the time frame for investments ranges anywhere between one to five years,
although they could be longer. Moreover, it helps you diversify your portfolio within property investments and you can start with a small sum.
Investing in property no longer needs a massive capital investment or longer-term commitment. You can start small, diversify your sum within various buckets and see what works for you. You can become a property investor in a premium market like London, quite easily.