A Financial Journey

Property Investing

There is a real split between those who advocate holding property as part of your portfolio (Rich Dad Poor Dad, many FIRE community members for example), and those who don’t (Pete Mathew, JL Collins).

There are now several ways to investing property, with varying levels of work required, risk, and potential profits. I will summarise them here.

Buy to Let

Become a hated landlord (and stay away from the Guardian!), buy a property and rent it out, either privately or via the local authority. High risk in terms of ongoing problems with tenants, costly void periods, and an increasingly unfavourable tax regime. This is what I’m currently working toward, as I wish to have an income-generating assets for the future.

You can learn all about property investing by spending several thousand ¬£ on the sort of workshops advertised annoyingly loudly on social media, or, as i have been doing, listen to the back catalogue of The Property Podcast and learn it all. It takes time, but it’s free and unbiased. Nobody stood next to a hired Lamborghini telling you you too can make ¬£zillions in just some simple steps.

Crowd funded Property

There are now a variety or websites which allow you to pool your money with other investors to buy Buy to Let property.

This includes Property Painters, Property Moose, and Bricklane, all of which I’ve used.

The risk is much lower, as you only own a small part of a property (probably several properties), but also without the potential high profits should a property increase in value.

Some of the properties I had shares in with Property Moose did have issues, either long voids, or developments not going as planned.

I stopped using Property Partners when they started charging a monthly fee (which was very poorly communicated when a new boss took over). With such a small amount invested it wasn’t worth me paying the fees. I understand many other people sold up too.

In order to withdraw your money you need o be able to sell your shares. After (usually) 5 years the property will sell, and you of course hope to make money. you can generally sell before then but only for a price someone is willing to pay.

It becomes clear when there is an issue that the odds are stacked heavily in the platform’s favour, and any losses bourn by the share holders. For the 3-5% rental ‘dividend’ (excluding void periods), I really don’t think it’s a risk worth taking.

REIT (Real Estate Investment Company)

This is a fund which holds mostly commercial property. It’s not the same as investing directly in properties, but they tend to follow the property market, are cheap to hold, and pretty low risk.

They tend to be used in the same way as bonds, to stabilise a portfolio. The potential gains are far higher than bonds, so iI prefer to have some REITS to balance my funds and shares. By law, REITs must distribute 90% of their profits in the form of dividends.