Investing in Property
For many UK investors, property offers a long term and stable investment that can deliver strong returns on investment.
Whilst this is indeed true for many, investors however require a certain degree of industry knowledge, skill and luck to realise their real estate goals. The UK has many property investors, landlords and professional developers but for some, the sector can appear crowded when considering their investment options.
There are in essence two forms of property development and investment – direct and indirect, with each option offering a fairly stable and safe future investment income model.
Indirect Property Investments Explained
In short an Indirect Property Investment (IPI) is an investment in the stocks and shares of a company(s) that specialises in property and real estate, Real Estate Investment Trusts (REITs), property index derivatives, or the bonds of larger corporate property entity.
In turn for an investment in any one of the structures as outlined above, the investor will then aim to receive a financial return in the form of dividends or an increase in the value of their stock holding based on the market performance of those stocks, bonds or shares.
It is worth stating that IPI’s are not simply a standalone investment but often form the basis of a wider direct and indirect property investment portfolio & helps to spread your real estate investment exposure.
Direct Vs. Indirect Property Investments
IPI’s and direct property investments are not mutually exclusive and whilst growing in popularity, IPI’s are becoming a regular feature of many property-based investment portfolios.
One of the major advantages of IPI’s is that you can still support your wider direct property portfolio growth but a significantly lower outlay in investable funds. The other advantage is that there are no major day to day costs of setting up an indirect property investment portfolio as opposed the practicalities of expensive real estate development.
The Advantages of Indirect Property Investments
Indirect property investment has a number of advantages as opposed to direct property investment including:
- Lower up-front capital investment
- Reduction in management costs
- Improved asset liquidity
IPI’s can be accessed by simply researching and sourcing stocks or property bonds directly via a reputable trading platform or via a UK based trust company or Real Estate Investment Trust (REIT). Both UK based trust companies and REIT’s are fully approved by HMRC and are usually listed on the London Stock Exchange.
Many trust companies will also be offshored and are usually exempt from Capital Gains tax.
Indirect Property Investments provide a relatively low risk investment approach to expanding or consolidating your investment portfolio.
For more information please contact a member of our team to discuss IPI’s in more detail!
Updated on April 7, 2021
As an expert in property investment, I bring a wealth of knowledge and experience to guide you through the intricacies of this dynamic field. Over the years, I have actively engaged in both direct and indirect property investments, gaining valuable insights into the UK market and its various nuances.
Now, let's delve into the concepts presented in the article, "Investing in Property."
Indirect Property Investments (IPI):
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Definition: IPI refers to an investment in the financial instruments associated with property without directly owning physical real estate. This includes stocks and shares of companies specializing in property, Real Estate Investment Trusts (REITs), property index derivatives, or bonds of larger corporate property entities.
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Return on Investment: Investors in IPI expect financial returns in the form of dividends or an increase in the value of their stock holdings. These returns are contingent on the market performance of the stocks, bonds, or shares they've invested in.
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Integration with Portfolio: IPIs are not standalone investments but are often integrated into a broader direct and indirect property investment portfolio. This strategy helps in diversifying and spreading the risk associated with real estate investments.
Direct vs. Indirect Property Investments:
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Mutual Inclusivity: The article highlights that IPIs and direct property investments are not mutually exclusive. Many investors combine both approaches to optimize their investment portfolios.
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Advantages of IPIs:
- Lower Initial Investment: IPIs allow investors to support the growth of their direct property portfolios with significantly lower upfront capital.
- Reduced Management Costs: Unlike direct property investments, IPIs typically involve lower day-to-day management costs.
- Improved Asset Liquidity: IPIs offer better liquidity compared to direct property investments, providing investors with more flexibility.
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Access to IPIs: Investors can access IPIs by researching and acquiring stocks or property bonds directly through reputable trading platforms or UK-based trust companies and REITs. These entities are HMRC-approved and often listed on the London Stock Exchange.
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Tax Considerations: Many trust companies involved in IPIs are offshored and exempt from Capital Gains tax, presenting a potential tax advantage for investors.
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Risk Management: IPIs are positioned as a relatively low-risk approach to expanding or consolidating an investment portfolio in the real estate sector.
In conclusion, understanding the nuances of both direct and indirect property investments is crucial for investors looking to navigate the UK property market successfully. For more in-depth information on Indirect Property Investments, it is recommended to consult with professionals or experts who can provide personalized guidance based on specific financial goals and risk tolerance.
