If you’re interested in investing in property – but haven’t taken the opportunity in a while, or ever – there are a number of factors that might be holding you back. Perhaps these include the sums of money involved, the risks and hassles associated with buying, selling and renting – and the expertise you believe is required to invest successfully?
This is where online property investment platforms and crowdfunding sites might come in. Here are five key elements of online investing to think about if you’re concerned about more traditional ways of investing in property.
1. You don’t need to pay for a whole property!
Buy-to-let and buy-to-sell properties can entail big upfront costs, like the deposit, mortgage arrangement fees, development and legal costs, valuation fees, and stamp duty. There can also be ongoing costs like maintenance, letting agencies, safety checks and landlord’s insurance. Even if you invest through property funds, this still often means stumping up large amounts of capital as many require minimum investments of thousands of pounds.
Investing through a property investment platform or crowdfunding site can simplify and reduce outgoings considerably. For example, you can often invest relatively small amounts – often in the hundreds of pounds, rather than thousands. It should be noted that due to the riskier nature of property investing in this way, most firms will have a higher minimum investment to dissuade people accidentally stumbling into an investment where they weren’t aware there was a risk to the whole capital sum.
Yes, there is expenditure beyond this, such as the developer’s fees, but this is usually factored into a headline projected return. This means you can make a decision on whether the reward is worth the risk, based on that figure (which, of course, is never guaranteed). Not having to commit huge sums means you can split your investible capital across a number of investments, which brings us to point
2. You can reduce risk caused by exposure to a single asset
If you were considering investing in equities, it’s unlikely you would pile all your available capital in a single company – even a star of the FTSE 100. That would give you too much exposure to a single investment, a big risk to take with your money. Yet, many of us don’t think this way about property. If you buy one property, your investing fortunes are tied to the performance of a single asset. Even two or three properties doesn’t necessarily spread the risk by much and a calamity with one of those properties could mean a big hit to your overall wealth. Like traditional funds, investment platforms often offer property-linked funds that spread your investment across multiple developments of different kinds, in different sectors and in many locations. Unlike many property funds, they can be accessed for relatively small amounts.
3. You can outsource your monitoring
The best property investment platforms and crowdfunding sites will be partnering developers and asset managers that have a wealth of experience in building robust investment cases. They will also update you regularly on your investment so you know when things change for better or worse, informing any decisions you might need to make. This helps alleviate the stress that can come with doing hours of your own research. And it can reduce the risk of you making mistakes or missing something important.
4. There are certain safeguards around the investment process
We’re sure we don’t need to remind you that your capital is at risk in most, if not all, ways of investing in property. However, the best property investment platforms should have the legal right to intervene in failing investments to take action that minimises any detriment or, in the best cases, gets them back on track. They should also ensure that any uninvested funds in your account are held separately to any investments that have drawn down and are appropriately safeguarded. This means they are ring-fenced from the performance of any investments or the fortunes of the company itself.
5. It’s very easy to invest
Online property investing can be done on at your home computer – or on the move on a laptop, tablet or smartphone. Most platforms have a simple sign-up process but are generally restricted to certain types of investors to ensure that you are familiar with the concept of investing, that you understand the risks and that you can afford any potential losses. This usually involves meeting the criteria to self-certify as a high net worth or sophisticated investor and a quick method of verifying your identity by sending in documents electronically. The whole process often takes just five minutes. Once you are signed up and confirmed as an eligible investor, you can begin browsing opportunities and investing at your own pace.
So, if you’re confident good returns are to be made in residential or commercial property over the coming months and years based on your own research, and want to look into alternative ways of gaining exposure to property, you could consider reducing certain potential risks and hassle by allocating some of your capital to online investing. But do remember that returns are not guaranteed. If your interest in online property investment has been piqued by this article, why not take a look at Brickowner’s investment opportunities?
This article contains Brickowner’s opinions, based on the information that is available. Always seek the advice of a qualified independent financial adviser if you need advice. All investors should be aware that their capital will be at risk. The value of investments can go down as well as up. Forecasts are not a reliable indicator of future performance. Brickowner investments are not covered by the Financial Services Compensation Scheme. There is no recognised market to sell Brickowner investments. Brickowner investments are illiquid.