Different Ways to Invest in Property
Property is one of the most common forms of investment, along with bonds, shares and cash. With the UK market still suffering from a severe shortage in housing and a rising population, housing prices are set to follow suit. By investing in property, you are securing a financial return. Whether it’s to expand your housing portfolio or if you’re looking to branch out, the gpfm Financial Planners’ guide will point you in the right direction.
Buy-to-let has been available in UK since 1996 with the most common type of buy-to-let being an interest-only one. Through buy-to-let you can supplement your main income through renting out your property to tenants. For this kind of property investment, you should keep in mind that the rental yield you’re likely to receive will be minus income tax, mortgage repayment, any maintenance, repairs, energy bills, running costs and agents’ fees.
Selling for profit
When looking for a prospective property to purchase you should look in ‘up-and-coming’ areas. These places are not necessarily cheap but are desirable and increasingly sought after locations to live in. There could be for several reasons such as good schools, excellent local amenities, new transport links etc. Thinking about the property’s area is a key part of successful property investment. The profit you’ve made on the sale of your property, the capital growth, depends on many factors like the location, age and state of the property and of course the ever-unpredictable market.
Indirect property investment
Indirect property investments are an alternative to simple, direct property investment, enabling the user to invest in property through stocks and shares without owning a house yourself. There are three main routes to indirect property investment, these being:
- property company shares
- real estate investment trusts (REITs)
- land banking schemes
Buying a property with the view of turning it into a holiday home is another investment option. Unlike buy-to-let properties, holiday homes are not subject to the tax relief crackdown. With some holiday homes earning the investor three times as much compared to a buy-to-let, it’s certainly something to think about. What’s also important to keep in mind is the ongoing maintenance and running costs of a holiday home.
Information in this guide is for reference and not advice as individual circumstances are different. To protect your financial future, it is always advisable to have a broad range of financial assets in your portfolio. Speak with a gpfm financial planner to ensure that your plan is risk-averse.
This article is for information only and must not be considered as financial advice. We always recommend that you seek independent financial advice before making any financial decisions.