With housing prices all over the place, we take a look at ways to invest in property, without even stepping through the door.
Made popular in the noughties, Off Plan investment was seen as the “fool proof” way to invest in property, particularly abroad in holiday destinations, typically the Mediterranean although opportunities were available almost anywhere on the planet. The more “Emerging” the market was, the higher the potential returns, and subsequently it has proved, the risk.
Whilst Off Plan purchasing now has a somewhat tarnished name, it is still a viable investment concept provided due diligence is carried out by the investor and not just taken for granted from the promoter or developer.
Real Estate Investment Trusts. (REITS)
Initially developed in the USA, REITS are now available in a number of countries for the retail investor. UK REITS have a tendency to follow housing price trends, although of late despite the downturn, a few have seen respectable growth given the current market conditions.
In very basic terms a REIT is a corporation specifically for investing into the property market, commonly in the form of commercial property (Although almost any property from residential to industrial can be used) UK REITS specifically are required to distribute 90% of their income, and have to be listed on the a UK stock exchange, allowing the purchase of “shares” within the REIT. Currently, individual REITS trade anywhere from under 50 pence per share up to around 13 pounds. As an investor, you own stock in the REIT itself without the need to actually buy any property, your returns are made in the form of dividends if holding for considerable time, or the pure difference in purchase to sale of the REIT itself.
A relatively new idea to the market place, adapted from the standard use of derivatives in other investment sectors such as currencies or stocks. At present, property derivatives are only really accessible to corporations and extremely high net worth individuals using leverage. In layman terms a property derivative can have two prime uses, to hedge against a market, as well as outright speculation. In essence, a derivative is some of the exposure held by the asset owner that is being sold. If you were to buy in, then you would be buying some of the profit or loss that the investment made over the allocated time span.
In a nutshell, you are buying into a piece of the action on someone else’s assets. (It is worth noting that REITS are able to and do hold property derivatives.)
Secure Exit Strategy (SES)
A product developed by ourselves at IPIN, the Secure Exit Strategy (SES) is applied to a development project. SES itself dictates that the developer is contractually bound to release the client from the contract within a fixed time period, at a minimum scaled percentage profit on the initial investment. This ensures that the client never has a need to “complete” on the property or encumber further debt in the form of loans or mortgages, or have the headache of trying to sell.
The investment itself only requires an initial deposit by the client on the property, whilst the returns are paid on the total unit value allowing investors to take advantage of the developers gains.
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- Thursday 18 March 2010