Property Investments

This investment option is essentially a subset of the buy-to-let model with an exclusive focus on achieving rental yield through letting to students. The student rental sector has been the best performing asset class in the UK since 2011, with high yields and low void rates helping to attract investment in excess of £3 billion into student property in 2016.

Investors in this market have historically focused on maximising rental yield by reconfiguring established residential properties for students. However, recent legislation has sought to restrict this practice (see the subsequent section for details). This change in legislation has coincided with increased demand for purpose-built student accommodation, which is itself becoming a more popular investment option. Although the returns through this can be less than the more traditional route (as such investments are usually managed via a third party), it can nonetheless be an attractive proposition for passive investors.

Since 2005, the UK Government has actively encouraged institutional investors to extend the provision of private rental properties through investing in Private Rental Sector ("PRS") developments.

Measures that have sought to encourage this include Real Estate Investment Trusts ("REITs"), the amendment of Stamp Duty Land Tax ("SDLT") in 2009, which led portfolio buyers to pay the same SDLT as buy-to-let investors acquiring a single unit, and in 2013, the creation of a PRS Taskforce to establish which incentives would most effectively stimulate further growth.

Office space is graded based on its location and specification. The grading system runs from ‘A’ through ‘C’.

‘A’ grade accommodation is the most desirable; to achieve this classification it must combine premium location (e.g. in a central urban location) and high specification (e.g. climate controlled, superfast broadband).

Office accommodation that offers one but not the other is typically classified as ‘B’ grade, and commercial accommodation offering neither is generally classified as a ‘C’ grade property.

Opportunities to invest in retail property development are as diverse as the retail sector itself; from a small, suburban, single unit tenanted by an established newsagent to a purpose built mall with a range of pre-lets to household names requiring associated infrastructure works.

Direct purchase is the easiest investment structure to engage with; the process of identifying a property and purchasing it alone, funded either by existing or borrowed capital.  This model translates across both residential and commercial property, although the direct purchase of residential property is often more achievable than direct purchase of commercial property.

The approach is best described as follows: you raise the money (whether that is through your own funds or borrowing), purchase the property, and subsequently take action to execute your strategy (i.e. utilise, rent or sell).

Importantly, while new property investors may identify with this approach most readily, it is arguably the riskiest investment structure and the one that requires both the most capital and time to be invested.  Direct purchase leaves the investor fully invested in the property in every sense; while the returns are therefore all yours, so is the associated risk.

Professional residential development

Many property investors begin with residential buy-to-let as their first method of building a property investment portfolio.  In many cases, this involves refurbing a property and adding some value before renting the property out.

More experienced property professionals with an element of property development and refurbishment experience choose to expand into residential property development.

Housing demand in the UK continues to increase and most new homes being built by volume housebuilders, there's a gap in the market for smaller residential developer's to develop smaller sites from single plots to larger schemes that generally are too small for larger housebuilders to consider.

Tackling a residential development requires skill knowledge and a decent amount of capital to buy the land and, generally, the ability to raise development finance to build out the residential development scheme.  In a sensible economic climate, there are decent profits to be made from developing residential sites. Residential developer's target development profits in excess of 20%.

If you have the skill and experience, then residential property development deliver a lucrative return on your capital employed depending on how you finance a scheme.

Property company investments

Generally seen as the middle ground between directly buying a property and investing in commercial property funds, investing in property companies gives investors the ability to play a more active role in their investment portfolio. For instance, a commercial property fund that purchases shares may invest partly in British Land, Land Securities and other property companies listed on the London Stock Exchange.

Therefore, investing in such a fund will include an investment in a property company. However, investors can invest directly in a chosen property company, such as British Land or Land Securities. As such, you can make your decision based on your preferences and research. If you invest in these companies directly, you will avoid paying fees to a professional fund manager. Conversely, you will not be able to rely on their skill, experience and focus to manage risk and hopefully improve any potential returns.