You may not be on the property ladder yet \u2013 but there are many ways anyone can access property today regardless of how much you have to start with.<\/p>\n
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This guide covers the basics and introduces you to some of the less publicly known investment options out there.<\/p>\n
Here, we\u2019ll cover 4 different property investment methods:<\/strong><\/p>\n But first, let\u2019s talk about what you want to look for when investing in property.<\/p>\n There are only two things you want when investing in property:<\/p>\n It\u2019s rare that you will get both.<\/p>\n When assessing a purchase of property or land, ask yourself \u2013 do I want a good yield or capital growth?<\/strong><\/p>\n Yield<\/strong> = the money you get back per year.<\/p>\n What\u2019s a good yield? Different investors give you different answers. Typically an average yield in London is around 4-5% while the best yields are in commercial and HMO properties and can be up to 15%.<\/p>\n Capital growth <\/strong>= an increase in the value of an asset or investment over time.<\/p>\n <\/p>\n A balanced portfolio will have a mixture<\/strong> of both \u2013 yield and capital growth. This will protect you from any adverse effects of the housing market\/wider economy, e.g.:<\/p>\n <\/p>\n Firstly<\/strong>, you\u2019ll have the complete freedom<\/strong> to do as you please. However, a major downfall is the amount of work involved<\/strong>. There\u2019s so much to ask yourself before you invest. Are you buying residential, commercial, mixture or land? The type of property has an effect on the yield.<\/p>\n Secondly<\/strong>, you\u2019ll have to find the property yourself<\/strong>. With the right contacts, you can get access to exclusive off-the-market deals. Other methods we\u2019ll discuss below won\u2019t have these (but may have their own).<\/p>\n Thirdly<\/strong>, you\u2019ll need to know what are you plan on doing with your asset. <\/strong>Are you going to sell, hold, sell as a back-to-back, buy-to-let? Do you know how to do any of these?<\/p>\n Finally<\/strong>, whatever way you choose, you\u2019re going to need to finance it using a lot of upfront cash. Borrowing from a friend or the bank has legal implications<\/strong>. Early on you will probably need help.<\/p>\n Questions to ask: Are you financing 100% of it? With friends, family or a partner? If so, what rights will they have? Will you refinance your property? Are you pooling money from a number of people? Is it part of a pension fund? Do you need help from the bank?<\/em><\/p>\n If you do need finance from a bank, there are several halal options available, such as an Islamic mortgage. You can compare them on our Islamic mortgage comparison<\/a>. You want to minimise your leverage (an ideal amount is about 20%).<\/p>\n Compared to the other methods discussed below:<\/p>\n With other methods discussed below, you can only invest in what is presented to you and you must pay fees to them.<\/p>\n However, the downfall of DIY<\/strong> is that you have to carry out your own due diligence, research and investment. You will also need to do legal work by instructing a solicitor<\/strong>, which can run into the \u00a31000s. This is because you\u2019ll need to carry out inquires, searches and checks. If you want to avoid all this \u2013 invest through a company that will do this all for you.<\/p>\n Consider starting small to reduce the risk.<\/strong> You will learn through doing it and making mistakes \u2013 better that it\u2019s a mistake you can afford. Or you can consider investing in a REIT<\/a> (Real Estate Investment Trust) or fund as discussed below.<\/p>\n Remember \u2013 it\u2019s not ok to get a conventional mortgage if you can\u2019t afford an Islamic one. Mortgages are almost always haram \u2013 read more here<\/strong><\/a>.<\/p>\n TL;DR: Need more upfront cash, but control full yield. Less diversification, lots of hard work. <\/strong><\/p>\n Almost all of the pitfalls I mentioned above regarding DIY are covered under this method (but at a cost).<\/p>\n A property investment company pools money from a number of people, invests in the property and then shares the yield or capital returns<\/strong>, depending on their strategy.<\/p>\n They will control the investment \u2013 taking all the work off your hands.<\/p>\n An example of a property investment company is Yielders. We have a full review on Yielders<\/a>. I\u2019ve listed some other relevant points for you below.<\/p>\n Yielders are an FCA-regulated sharia-compliant property investment company that allows hands-off property investing.<\/p>\n They are an online platform that allows people to come together and invest in a selection of assets that might otherwise not be available<\/strong> if investing individually.<\/p>\n Yielders will pick assets themselves using their own criteria when assessing the returns for investors. Yielders will also manage the investment and administration of the investment vehicle<\/strong>. This makes it as hassle-free as possible.<\/strong><\/p>\n They have a slick investment calculator<\/strong> for you to play around with \u2013 giving you an idea of what you\u2019ll get for your investment. Returns are made quarterly or monthly depending on the chosen investment. As a shareholder, you are also free to leave the investment whenever you want by re-listing your property on their platform.<\/p>\n You\u2019re<\/strong> saved the pain of finding a property\/land<\/strong>, figuring out what to do with it, managing it, trying to rent or sell it and more. However, you\u2019ll be receiving a much smaller yield\/capital return on the sale.<\/p>\n A downfall compared to DIY are fees you\u2019ll have to pay<\/strong> \u2013 them doing the work does come at a cost. For example, Yields charge: 1) a 2.5% structuring fee, 2) a 10% management fee and 3) a 15% profit share on exit. There are also other fees \u2013 you can read more here<\/a>.<\/p>\n Another disadvantage is you\u2019ll only have the option to invest in properties that they present to you. Again, that will save you time, but it comes at a cost.<\/p>\n Check our interview with Zeeshan Uppal<\/a>, co-founder of Yielders.<\/p>\n TL;DR \u2013 More diversification to your portfolio, Less upfront cash required, but you\u2019ll lose full yield, have less control, pay high fees to the company.<\/strong><\/p>\n If committing to full ownership of a property is too risky for the time being, consider investing in a REIT<\/a> (Real Estate Investment Trust) or fund. Such products are well structured and offer more liquidity to the holder. It also offers diversification to your portfolio.<\/p>\n A REIT is a company that invests in real estate by pooling the capital of numerous investors. This is another way for individual investors to earn dividends from real estate investments without the hassle of managing it themselves.<\/p>\n The downfall is they offer little capital application.<\/p>\n TL;DR: Safer than DIY, more liquid, greater diversification, high yield, low capital apparition. <\/strong><\/p>\n UPDATE: Cur8 Capital, our own investment platform, now offers private real estate fund investments. See here<\/a>.<\/strong><\/p>\n This is a more high growth\/high reward investment.<\/strong><\/p>\n Property development investments are great because they provide the opportunity to make money at various stages of development<\/strong>. Whether it\u2019s before or after planning permission is granted or before the building is rented out or sold, there are significant returns to be made.<\/p>\n However, they do have some issues,<\/strong> such as projects running behind leaving a delay in your return.<\/strong> Furthermore, you\u2019re investing in something that is yet to be built, of which the profits from the sale will be recouped and passed back to you. This leaves it much more out of your hands and you\u2019re left dependant on the market, the developer and the buyer.<\/p>\n Property development investments at a bigger level require deep expertise, networks in the property industry and experience. In this regard, Godwin, Yielders<\/a> (they have a different arm called \u201cTop Yielders\u201d) and Introcrowd are great options. You can compare them on our halal investment platform<\/a>.<\/p>\n You can invest in development projects on platforms such as Intro Crowd and Godwin.<\/p>\n Godwin Capital<\/a> utilises its team of experts to deliver high standard projects including homes, commercial spaces, and local community facilities. They offer fixed returns of between 8 and 11% annual return. Godwin is a relatively rare fixed-return product structured in a sharia-compliant way (with full mufti certification) with a reputable mainstream developer.<\/p>\n It is an illiquid investment however as the product requires money to be locked in for over two years. There is also the risk of Godwin projects failing or being delayed, and as a result the offered returns are not met or worse you lose some or all of your initial capital.<\/p>\n Yielders<\/a> allows investors to invest in high-yield property and commercial developments. They source off-market deals before the wider market is aware of the opportunity and have further due diligence carried out before deciding to go ahead.<\/p>\n Once confirmed, they create an SPV (special purpose vehicle) to buy the property and then offer it to the crowd. This means that when you invest in a Yielders deal you\u2019re comfortable that the deal is secured and won\u2019t fall away if the investment amount isn\u2019t hit.<\/p>\n If you would like to sell before the scheduled sale of the property, you can contact Yielders who will offer your stake on their platform. There is no guarantee that someone will buy your portion, but historically each offer has been taken up.<\/p>\n Top Yielders is open to more affluent investors and gives exposure to higher risk higher reward development projects. Projects are usually 12-18 months and there is a \u00a350,000 minimum investment, with a projected 15% annualised return.<\/p>\n There are exit, management, and setup fees so do have a look at our in-depth review of Yielders<\/a> before deciding to invest.<\/p>\n We have also heard that some recent projects saw delays and issues \u2013 this is inevitable in this asset class \u2013 but just important to be aware of this.<\/p>\n Intro Crowd<\/a> is an investment into land developments \u2013 a different genre of property investment to property rental or redevelopment. It is a nice complement to other asset classes.<\/p>\n Introcrowd is led by an experienced team with backgrounds in land acquisition and planning permission. The minimum investment amount into a project is \u00a35,000, and after that, you can buy anything in \u00a3500 increments. There is a 2% set up fee and 5% exit fee.<\/p>\n As for returns, it depends on the project, but 50-100% returns on investment over a 5-year term are not unusual. Introcrowd provide a report from the outset which helps.<\/p>\n Again, to reiterate, projects can run slower than expected, planning permission may unexpectedly not be granted etc. so, while the land gives at least some security to investors, there is a risk of loss of some of the investment.<\/p>\n TL;DR: higher yields, higher risks. <\/strong><\/p>\n If you want to know what we think the property market (residential and commercial) will look like in 2021 \u2013 then check this article here<\/a>.<\/p>\n Okay, so you now know how property investments work.<\/p>\n Now you should check out the other three main investment categories for your portfolio:<\/p>\n Also, check out our Islamic mortgage comparison tools<\/a> if you\u2019re considering financing from a bank.<\/p>\n If you enjoyed this article, you can follow me on Twitter<\/a> or LinkedIn.<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" You may not be on the property ladder yet \u2013 but there are many ways anyone can access property today regardless of how much you have to start with.<\/p>\n","protected":false},"author":61,"featured_media":6973,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":"","wds_primary_category":0},"categories":[13,22],"tags":[33],"acf":[],"_links":{"self":[{"href":"https:\/\/www.islamicfinanceguru.com\/wp-json\/wp\/v2\/posts\/6972"}],"collection":[{"href":"https:\/\/www.islamicfinanceguru.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.islamicfinanceguru.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.islamicfinanceguru.com\/wp-json\/wp\/v2\/users\/61"}],"replies":[{"embeddable":true,"href":"https:\/\/www.islamicfinanceguru.com\/wp-json\/wp\/v2\/comments?post=6972"}],"version-history":[{"count":0,"href":"https:\/\/www.islamicfinanceguru.com\/wp-json\/wp\/v2\/posts\/6972\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.islamicfinanceguru.com\/wp-json\/wp\/v2\/media\/6973"}],"wp:attachment":[{"href":"https:\/\/www.islamicfinanceguru.com\/wp-json\/wp\/v2\/media?parent=6972"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.islamicfinanceguru.com\/wp-json\/wp\/v2\/categories?post=6972"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.islamicfinanceguru.com\/wp-json\/wp\/v2\/tags?post=6972"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\n
What to look for<\/h2>\n
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Yield<\/h4>\n
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Capital Growth<\/h4>\n
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A balanced portfolio<\/h2>\n
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1. DIY<\/h2>\n
Pros and Cons<\/h3>\n
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2. A Property Investment Company<\/h2>\n
Yielders<\/h3>\n
Downfalls<\/h3>\n
3. Use a property fund<\/h2>\n
4. Development projects<\/h2>\n
GODWIN CAPITAL<\/h4>\n
TOP YIELDERS<\/h4>\n
INTRO CROWD<\/h4>\n
Conclusion<\/h2>\n
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