If buying property is too expensive of an investment for you, it’s not the only way you can add real estate to your investment portfolio. There are plenty of ways to have a stake in the real-estate game. These alternative methods of property investment in the UK 2020 will let you step on the property ladder without outright buying a property.
Here are the ways you can invest in real estate without actually having to buy any property:
- Invest in Real Estate Investment Trusts (REITs)
A REIT, or real estate investment trust, is a company that either owns or finances real estate that produces income. REITs invest the majority of their money into real estate, and that’s how they make the majority of their income.
There are REITs that focus on both residential and commercial property. Most REITs are equity REITs, but some trade in mortgages instead of actual properties. Perhaps most important for you, the investor, is that at least 90% of the taxable income it pays is via dividends to the shareholders. So researching thriving REITs and purchasing shares in them has the potential to be a profitable investment.
- Invest in Real Estate Mutual Funds
Real estate mutual funds differ somewhat from REITs. Whereas a REIT is an actual company, mutual funds are simply investments pooled together and then overseen by an investment manager.
A mutual fund allows investors to diversify their portfolio both in terms of having a mutual fund and having real estate. As with other sorts of mutual funds, you can choose ones that are growth-oriented or income-oriented. Because they are a diversified asset, they are designed with the intention of mitigating risk, but they are still vulnerable to the inherent risks of real estate. If a real estate-related risk negatively affects one of the investments in the fund, it’s likely to impact a lot of others too.
- Invest in Real Estate ETFs
In addition to REITs, there are REIT ETFs or exchange-traded funds. REITs invest in real estate whereas REIT ETFs invest in REITs.
It could be less risky than investing directly in a REIT, and certainly less risky than actually buying property, but you’ll also be getting back less of a return. Still, if the risk is one of your biggest concerns when considering a real estate investment, a REIT ETF is something that you might think about for property investment in the UK in 2020.
- Wholesaling houses
Wholesaling real estate is similar to flipping homes, but with the caveat that you don’t own the home and therefore don’t have to front any maintenance cost.
Wholesaling a house means contracting someone who is looking to sell their house, and quickly taking that contract and selling it to a prospective buyer for a profit, which the wholesaler keeps. No renovation required.
If you can successfully do this, it is worth the efforts as there’s much less risk due to the fact that you’re not putting your own money into the operation. The difficult part of doing this is actually finding a house that has been undervalued on the market that you can manage to sell for a profit.
- Use an online real estate investment platform
Much like with other varieties of stocks, there are online platforms that help you make real estate investments. Often, the investments you make are part of crowdfunding, a way for others to be able to buy property without requiring venture capital.
This option tends to be more for those with money to spare, considering the costs necessary to purchase the large property.
- Real estate partnerships
Some real estate investments require an exorbitant amount of money and not everyone can foot that bill. If you’re not the only one involved in the investment, however, it could become more manageable.
Partnerships are a common way to invest in real estate, with each person taking over different responsibilities. Often, this can be used as a way to purchase property at a lower price. You can set whatever terms suit you, such as simply paying the mortgage, or perhaps handling the down payment for the property. Depending on the terms of your partnership, you may end up investing in real estate without doing too much hands-on work of owning property.
- Invest in real estate service companies
There are plenty of companies that work primarily in the world of real estate that you can invest in.
Look beyond REITs for your real estate companies; companies involved in real estate in areas other than actually buying property can be a great way to not only diversify your portfolio but get a good sense of the current real estate market.
- Invest in home construction companies
Another real estate-related investment that could be worth your time is investing in companies that are involved in the construction of homes.
It’s an intriguing investment option for those who believe that the construction of homes is something that will continue to increase because if that’s true, the business should continue to boom.
- Become a real estate appraiser
Have you considered employment within the real estate industry? It can not only be an investment of sorts but prepare you for how the market is doing and give you a good indication of when the time is right to make good investments.
One job within the industry to consider is a real estate appraiser. An appraiser can specialize in either residential or commercial real estate, and determine the value of a property based on the property itself and the surrounding area.
- Start a brokerage or become a real estate agent
You could even get into selling real estate. Real estate agents do require some education and training before they can actually get out there and flip houses, but successful real estate agents can take home nice commissions on the properties they sell.
Agents generally work for real estate brokers, and if you’d rather be at the top than out there selling the homes, perhaps consider opening a brokerage and hiring agents. Brokerages get a large part of the commission that the agents make, so having successful agents can bring in a lot of money.
However, starting a brokerage isn’t simple, and it’s incredibly expensive. You need extensive training and licenses to open and maintain one. But, if you’re a successful agent looking for the next step in your real estate career, it could be a decent idea. If you don’t yet have that level of success, knowledge, or funding, you may want to start by becoming an agent.
This article is for information purposes only.
Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.
There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.