For many investors, property is a key part of securing a comfortable retirement, winding down to part-time work, pursuing a passion project, or creating a legacy to pass onto your relatives. Whatever your specific reason, having a clear purpose will shape every aspect of your investment strategy.
This clarity will guide your decision-making process, from the types of properties you target to your financing strategies and overall approach. It ensures that your investments are not only profitable but also aligned with your long-term goals.
Why Property?
In the UK especially, property is a workhorse of the investment world. The market is relatively well-behaved and buoyant in the face of changing patterns, so it makes for a great choice for long-term buy-ins.
Property in general is a vehicle for a steady stream of income – and if done correctly; you can quickly compound your returns into passive income through rentals and more.
Once you get into the rhythm of diversifying your investment portfolio; you can start to reduce your overall risk and claim sizable results.
So, what are the best ways to join the club?
1. Buy-To-Let
This is your simplest, most common approach to invest. This involves purchasing a residential property and renting it out to generate rental returns and capital appreciation.
2. Real Estate Investment Trusts (REITs)
This involves purchasing a share of a company which owns its own form of real estate. Your share can be easily bought and sold, unlike direct real estate; so, you will benefit from a diverse portfolio without taking on as much risk. (They are also obliged to distribute 90% of their taxable earnings to shareholders through dividends – so this is a strong choice for if you want lower risk ventures.)
3. Peer-to-Peer Lending
This is where you can lend capital to developers and landlords through an online platform such as Property Partner or Funding Circle. Some platforms can offer much higher interest rates compared to their traditional counterparts; with some platforms boasting an impressive 9.83% per year.
4. Loan Notes
Developers will often issue loan notes to raise the necessary capital for bigger projects. Lending capital to these developers will allow you to earn a steady rate of interest with the property as collateral.
So, what now?
Before you do move forward, make sure your investment purpose is clear and well-defined. This step will empower you to make sharp strategic decisions that align with your ultimate goals.
It is important you navigate this arena by being patient and doing your due diligence while recognising the risk. Before you go headfirst, sit with your decisions and consult the experts should you feel anything is amiss.
Experts and consultants that deal specifically in property investment will be extremely useful in your early stages, as they will be able to help you develop an airtight approach that will align with your risk tolerance.
They will have a wealth of knowledge and will likely be able to advise you on your portfolio management and market research.
Really take a moment to think about why you want to invest in property. Whether it's a quick 30-second exercise or a deeper exploration, understanding your "why" will provide a solid framework for your journey.
