With average house prices rising 70 percent between 2008 and 2018, at some stage a downturn could well have been predicted, Brexit or not. But growth is continuing in cities such as Oxford, Cambridge, Bristol, Manchester and Liverpool, while flagging or going into reverse in places like Aberdeen and parts of London.
The renovation market is pretty much played out, with more potential buyers than there are derelict houses, and the traditionally buoyant buy-to-let sector is looking less than rosy too, with tax and regulatory changes hitting profits and raising the cost of investment. So, what’s a property investor to do?
Mixing your portfolio is certainly an option. You could, for instance, use the capital gained from buying and reselling one property, to pay off the mortgage of another, which you retain as a rental. Bear in mind aspects of rental property ownership such as maintenance costs.
Not Just for Big Hitters
Of course, either buy-for-profit or buyto-let requires a large investment in the first place, and the biggest profits are generally reserved for high net worth individuals. There are, though, ways to benefit from these previously exclusive schemes, even if you have a relatively small pot of cash.
Alternative property investment allows you to put your relatively small equity, say £20,000, into a scheme which could be worth millions. The rest of the equity is contributed by co-investors, so you become part of a club set to profit from a major property investment. One advantage of this scheme is that you don’t have to liaise with the developer directly—it’s all done through an Investor Relations Manager— and another is that you don’t have to take on costs such as property maintenance.
You choose whether to buy into a redevelopment, or ‘off-plan’—a property which has not yet been built—or to spread your investment across multiple projects. The management team vets the projects, so you can be assured that they meet certain standards, and while it can be worth doing your own research about property prices, development costs, selling trends and timeframes, all this legwork can be done for you. Of course, your capital is at still at some risk, and past performances do not guarantee future results, so you should make sure your investors’ community is FCA regulated and always consult an independent financial advisor before making any decisions. But, if your worries about the scale of investment or the responsibilities of going it alone suggest you would be better off in a ‘club’, alternative property investment may well be the place for you to start.
This feature was originally published in the spring edition of Arts and Collections, which you can also read here.