Investing In Property

You can invest in property directly or indirectly through a ‘pooled’ or ‘collective’ investment scheme, like a Unit Trust or Open Ended Investment Company. Property investment carries high risks.

Direct property investment

Buying your home or a property to let out is a way of investing directly in property. However, although the Financial Services Authority (FSA) regulates most mortgage sales, it doesn’t regulate most buy-to-let mortgages. If you’re thinking of investing directly in property as a way of making money it’s important to be aware of the risks. In particular, beware of ‘get-rich-quick’ promotions.

Indirect property investment

Property Open Ended Investment Companies (OEICs) and Property Unit Trusts are schemes which pool investors’ funds into one fund which invests as much as possible in property. (The fund invests either directly and/or by buying shares in companies that invest in property). A few of these schemes are regulated, so there are safeguards to reduce the risk of financial loss.

Collective investments that include property

Some unit trusts, OEICs, investment trusts and life assurance policies include property in the range of funds they invest in. But they also include other investments (shares, government bonds, cash etc) to spread the risk. Some of these collective investments are regulated by the Financial Services Authority. Their marketing material will tell you which range of funds they invest in.

Getting financial advice

Property investment carries high risks. It’s a good idea to get financial advice before investing in any property scheme. Buying overseas property can be very different from the UK system in some countries and is full of potential problems. f you’re planning to buy an investment property, then you need to do a lot of your own research. An adviser does not need a licence to provide property advice although a real estate agent needs to be a licensed to represent property vendors.

Real estate agents are representing the owner of the property so take any ‘advice’ they give with a grain of salt. There are decent independent property advisers around who can act on behalf of individuals buying properties, but there are also dubious advisers who may give the impression of providing advice but they are really trying to sell you into a specific development. You may also consider hiring a buyer’s advocate to represent you but most individuals do the hard slog of checking out different properties themselves.

Posted in Property