They say that you should diversify your investment portfolio as much as possible. Not only do you want to invest in common stocks and bonds, but you should have some “alternative investments” such as hedge funds, art, private equity, and more.
One of the best alternative investments that offer real value and comparatively lower risk than the others is property. Property investments are considered to be slower and more stable investments because office buildings and apartments aren’t traded on exchanges. Real estate is protected from the daily swings in cost and value that regularly affect stocks and anything else traded on an exchange.
UK property investments are a great idea, given the quality and performance of these investments. Commercial real estate investments in the UK saw total returns of 6% in 2018, with residential real estate returning an average of 3%. There are local variations in the market, of course, but generally speaking, the UK property market does well.
The performance of the market is no reason to jump right in and snap up the first property you find. You should still do some due diligence and think about essential factors. Here are some of the most important considerations for anyone looking to invest in UK property.
The first thing to consider is how much money you have available to invest in property? You will need to have enough money to make a deposit on a property before you can start climbing the property ladder. These days, some platforms let you get started in property investment for a lot less. Shop around, and you may be able to get involved with property investments for as little as £100. These kinds of programs always have a caveat to them, however, so be sure to read the small print. If you have the capital available, it may be worth considering investing in a buy-to-let property.
Think about how much time you plan on investing alongside your financial investment. You can be active or passive in your property management. Actively investing in property means having to buy the property, maintain it, and manage tenants by yourself. You could be more passive and allow professionals to handle everything for you – for a fee.
Think about the liquidity of the investment – how quickly you might need to have access to your money. It can take time for a property investment to pay off as you need to find a buyer willing to pay your asking price. Some investment platforms or private funds could lock your cash up for extended periods of time too. A REIT could be the right choice for people who need their money fast as these investments are highly “liquid” and can be bought and sold quickly.
The risk factor is an essential part of any investment. How can you fit your property into your investment portfolio? Given how expensive property is, it will likely make up the bulk of your portfolio. Even the super-rich have around a fifth of their wealth tied up in physical properties. Carefully consider the risk of having so much of your money tied up in property and make sure you have an exit plan if needed.
Now you know what to think about with property investments, you’re in a better place to make them. Consult a property investment firm if you have any other questions or queries, or need any guidance navigating the wide world of UK property.