Buy To Let Versus Property Shares
Last updated 4th March 2019 • Ethan Mathews • JaeVee
Investors often ask us whether they should invest in their own buy to let properties or invest in property through companies like JaeVee.
With the increase in UK house prices over the last couple of decades, aided by a favourable interest rate environment, it has meant that buy-to-let properties have become an increasingly popular way to invest capital.
Adding to this a lack of new housing supply and continued growth within the private rented sector, it means that buy-to-lets have become a great way to generate high returns.
However, times do change and the risks involved with buy-to-let investing do appear to be increasing.
With the mortgage interest relief now starting to kick in (where investors are charged tax on the gross rent rather than the net), coupled with affordability remaining a challenge for a large number of first-time buyers, now could be the right time to consider investing in property through property companies rather than going it alone.
The risk versus reward ratio from doing so could be much more favourable to investors.
While investing in a buy-to-let means purchasing one property in one location, investing in property companies like JaeVee, that have multiple investment opportunities available, can spread the risk among a large range of assets.
For example, JaeVee has a mixture of residential and non-residential (commercial) properties in a wide variety of locations.
This can help to reduce risks such as a tenant failing to pay the rent (and the stress that comes along with trying to chase it)!
In a buy-to-let, such a scenario could be catastrophic for the investor involved – especially if they have only a small property portfolio.
But when investing in multiple UK property investment opportunities via JaeVee’s crowdfunding platform, it’s likely to be offset by other investments performing well.
Hence the importance of diversifying between rental income and capital growth opportunities.
The growth in house prices for UK property over the last couple of decades has caused the house-price-to-earnings ratio to rise to its highest level since records began.
History has shown that this has led to a disappointing period for house prices.
Property prices fell heavily in the late-1980s as well as during the financial crisis.
This could mean that the capital growth available within the buy-to-let sector is limited.
In contrast, property companies like JaeVee acquire assets on low valuations i.e we secure properties under their market value at the time of acquisition, thus creating a capital gain opportunity.
This suggests there may be a margin of safety on offer, and the overall potential return may ultimately be higher than owning a single property through a buy-to-let.
As well as having a more attractive risk/reward ratio, investment platforms like JaeVee offer greater simplicity for investors.
They can be purchased through owning redeemable shares, which means they’re tax efficient ways of making gains on property.
With the possibility to invest in each of our property investment opportunities with just a couple of clicks, it’s a much more simplified and attractive ownership experience for investors.
Add to that the ease of monitoring the performance and accounts via our online portfolio management dashboard, now could be the right time to ditch going it alone with buy-to-lets and take advantage of property companies like JaeVee.
Find out more about investing in some of JaeVee's current projects.
Please note, this blog post is not to be considered as investment advice. We recommend you seek independent financial advice and conduct your own due diligence before making any investment.