How to diversify with alternative property investments

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Property investing is not for everyone. In fact, only 68% of people end up owning their home at all. As a result it only makes sense that some people see alternative property investments as a way to plan for the future.

Some want to make more money to plan for retirement whereas others want to make more money to support their lifestyle. Either way, considering the below options should give you some good ideas on what to do with your money.

Alternatives to property investments

Here are a few alternatives to property investment that you should be aware of when making a decision in general on how to make a return on your money.

Property refurbishment

Instead of buying a property, you could refurbish a property instead. The good thing is if you were looking to invest in property and also live in the same place as you do so, this kills two birds with one stone.

You can buy a property to live in with a mortgage and use any additional cash you have to increase the value of the home but also furnish it to suit your taste.

In this way you can make a smart financial decision but also find somewhere to live.

property refurbishment as an alternative to property investment

Investing in Real Estate Investment Trusts (REITs)

A Real Estate Investment Trust (REIT) is a type of investment that allows individuals to investIn property without physically buying a property and not having to deal with complicated topics like house mortgages, solicitors or finding the right property valuation.

This is because you simply purchase shares in a trust, just like you would with stocks. The trust then uses the funds to purchase and manage a diverse portfolio of properties, such as office buildings, shopping centres, or apartment buildings.

Overall, investing in a REIT can be a convenient way to benefit from similar returns to property investment without the responsibilities of directly owning and managing properties. So, if you think owning property is a good idea but you don’t know where to start, this could be a good fit. 

Peer to peer lending

Peer-to-peer (P2P) lending is a way for individuals to lend money directly to other individuals or businesses, bypassing traditional financial institutions.

This gives you access to equity without having to comply with Mortgage terms and as long as you can come to an agreement on how money is spent will that be in property or in a separate business there is money to be made.

Investors with experience in property investing can apply their knowledge of credit analysis, property evaluation, and risk management to P2P lending Making it one of the ways you can buy a property with no money.

Using a pension with property

There are multiple pros and cons to using a pension as an investment strategy for your later years as opposed to investing in property. For more on this, read an article that goes in depth on comparing property vs pension

First of all the biggest advantage to pensions is that they compound every year and we do not require any effort to maintain. If you invest a sizeable amount in your pension, there is a good chance you will end up with enough to comfortably retire.

Pensions compound at a rate of around 2% to 3% per year so if you start investing early, you may end up with millions.

On the other hand, it is clear that property is a harder investment choice and typically requires a lot more effort. However, the returns are certainly more profitable and you can expect around 6% per year in most cases.

Best ways to get started in property as a pensioner

Starting a property investment as a pensioner can be a great way to generate passive income and build wealth. However, it is harder if you’re older and no longer have the same drive you did when you were younger.

Things like setting up a limited company, asking the right questions when buying a house and making sure you have a right property viewing checklist are all these you may not want to worry about after a certain age.

Here are some top tips you can follow to invest in property as a pensioner to increase your income and set up for retirement.

First of all, you should review how much you actually need to make through property and how much you have available to invest. Once you add up all of your retirement income and savings expenses or debt you could  start drawing conclusions.

This may need more or less of an investment and you realise but either way it is important to get clarity before you get started in property. Perhaps just a few buy-to-let is sufficient and not too far away from you either.

older man trying to find an alternative property investment

Another tip you can focus on as a pensioner is investing with other people in a joint venture or perhaps using a Real Estate Investment Trust especially if you have limited mobility or lack the ability to work hard.

Using your savings you can pay for someone to do the groundwork for you, including finding tenants, refurbishing properties and working with professionals such as solicitors and real estate agents.

However, you would have to pay for this and take a cut of the profits but even once this is done you may still beat the return you get on your pension anyway making it worth your while.

Finally, if you do consider doing it alone, take advantage of professionals who are there to make investing in property easier such as property managers and letting agents who are trained specifically for this purpose.

Co-investing in a property

Co-investing as an alternative to investing in property yourself exists as a practice of pooling resources together with other investors to purchase and manage a property. 

This type of investment strategy allows multiple investors to share the costs and risks of a property investment, while also spreading out the potential returns among a larger group of people.

Holiday lets

Holiday lets are a sort of home that is rented out to tourists for brief visits and is a furnished vacation rental. It is furnished with all the necessities, including mattresses, kitchenware, and linens, so that it is prepared for use by visitors.

These kinds of homes are popular with those who want to make additional money by renting out their space or with travellers looking for a more interesting and cosy lodging option than a typical hotel.

To ensure they are utilising tax advantages and upholding the conditions of their mortgage, landlords must, however, go by certain rules. There may be repercussions if you don’t follow these rules.

Why are holiday lets different?

Furnished holiday lets are different than just investing in property because they let owners claim a range of reliefs. These include business asset disposal reliefs, entrepreneurs relief and capital gains tax is also paid at a lesser amount.

Silver and Gold

Silver and gold are some of the most stable assets with gold being the more expensive item. You are able to buy gold funds in the stock market but you can also physically purchase these precious metals and store them somewhere safe.

However, you have to consider the risk of having the asset as a valuable item that you have to store correctly. In the event of a burglary, you could lose all of your money so using self storage could be the right thing to do.

Silver Bar Nest Egg

Starting your own business

Most people would consider starting a business as risky. However, by using online sources, there are options to start a business that do not require a lot of money up front.

As a result, before retirement age, it is perfectly reasonable for those who have the time to start something that could pay them on the side, perhaps alongside a job they already have.

Once you are able to remove your time from the business, through having employees you can begin earning money passively and use this as an alternative to the traditional property route that requires money to start.

One thing you can do is start a business that is related to property that doesn’t require money upfront such as using finance to buy a property at auction, becoming a deal sourcer and selling deals with high rental yields and rental income.

Alternatively, you could work in the build to rent centre or selling new build properties if you have property experience selling help to buy properties to those that need them.

Equity crowdfunding

Equity crowdfunding is a type of financing in which individuals pool their money together to invest in a company or start-up. 

In exchange for their investment, the individuals receive ownership in the form of equity, which gives them a share in the company’s profits and potential future success.

If you find a company that has a good future early on in their journey, you could own a significant amount of a company as it grows. Check out this website where you can find more about the topic.

Property as an investment strategy

Now you understand some alternatives for property investing, it is useful to look at property by itself and weigh up the advantages and disadvantages of investing. If you find the pros of this list don’t justify the cons, perhaps an alternative strategy is the right option for you.

Pros of rental property investment

When looking at the advantages of the rental property market, there are a few things that stand out to an investor. First of all, investing in property provides one of the few ways to benefit from both capital appreciation and cash flow.

For instance, a property can gain value from an increase in buyer demand and while doing so the owner of the property can still receive rental income. This dual approach is appealing to a lot of investors.

In addition, property allows buyers to gain control of an asset even though no they don’t completely own it. This is because of the buy to let mortgage that is in place allowing an investor to put in as little as 10% for a deposit but still control 100% of the asset.

Cons of rental property investment 

One of the cons of Investing in property is the fact that you have to manage people and tenants who are unpredictable. This means your income isn’t that stable as other sources of investment such as index funds.

On top of this, if you are only looking at investing in property in particularly expensive areas such as London, it could be a while before you are able to save up for a deposit on an investment property.

There are also a bunch of legal issues you have to worry about with a property business such as dealing with tenants in situ, Paying stamp duty and dealing with property expenses such as insurance.

stamp duty and land tax stopping people from investing in property

In conclusion

In conclusion, buying a house is not the right fit for everyone so read this article again if you still have no ideas on where to get started with alternative property investments.

However, perhaps property is good for you and you think you can make money from it. If this is the case, it is probably best to learn how to buy a property and perhaps buy a second home to start building an investment portfolio.

If you end up managing tenants, sign up below to the lofti property software where you will be able to manage by tendencies for completely free and have a smooth tenancy referencing process as you you build your income.

FAQ

What are the 4 categories of alternative investments?

The four categories of alternative investments are Hedge Funds, Private Equity, Real Assets, and Commodities

How much should I allocate to alternative investments?

The amount you should allocate to alternative investments depends on your financial goals and risk tolerance. A common guideline is to allocate around 5-20% of your investment portfolio to alternatives

What is a good return on investment?

A good return on investment varies but generally, a return that beats inflation and meets your financial goals is considered good. This can be anywhere from 5% – 15% per year

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donnell-bailey

Donnell Bailey

Property expert

Donnell is a property expert focusing on the property market, he looks at a combination of legislation, information from property managers, letting agents and market trends to produce information to help landlords.

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