Property investment – alongside cash, bonds and shares – is one of the four most common types of investments. Investing in property takes many forms, from buy-to-let to property fund investment. Here you can discover everything you need to know about how to invest in property, the different forms this could take and the risks involved.
With property, there are two main potential ways to make a return:
Even if you don’t want to buy a property yourself, you can get these potential benefits indirectly by investing in a fund investing directly in property.
There are also other related ways to invest, for example through property maintenance and management services.
Property prices and demand for rentals can go up and down, so direct and indirect property investments are for the long term.
If you’re willing to wait, you can ride out the losses in a slow housing market and earn profits again when times are better.
If you’re over-invested in property – for example, if most of your money is tied up in a buy-to-let property – you might end up in trouble when housing markets slow.
To avoid this, you should diversify your portfolio by holding different kinds of investments.
There are several risks when you buy property directly, whether for yourself or as a buy-to-let investment.
If you use a mortgage or a loan to buy property, there are additional risks:
With a pooled (or collective) property fund, a professional manager collects money from many investors, then invests the money directly in property or in property shares.
Fund managers charge a fee for this service, which will affect your earnings.
These are all common examples of property funds:
Before you make any decision about investing in property you should find out as much as you can.
You can research the potential pros and cons on your own, or take advice.
You’ll also want to look at whether a different type of investment might better suit your goals.
These guides will get you started: