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The monthly magazine providing news analysis and professional research for the discerning private investor/landlord

Searching for Safer Returns

Manish Kataria comments on a professional-grade process for investing in property development projects

As investors we need no reminding of the measly returns on our cash at the bank. In our struggle to beat inflation, we look for better returns in the stock market or property.  The former might be too volatile for some, so property has been the go-to home for many investors.   

But investing in buy-to-let property (BTL) has become less profitable for three reasons: higher prices resulting in lower yields, the phasing out of mortgage interest relief and the stamp duty surcharge for additional homes. Recent government policy has not been that kind to BTL investors.    

Yet the population will keep growing (Brexit or not) and the housing shortage will persist. In 2018 around 180,000 new homes will be built, compared to the official required number of 250-300,000. So how can investors stay exposed to property without incurring policy risk that affects BTL?   

Well, the government has to be onside with developers, and the investors who will fund the required homebuilding. This is why funding development as an investment strategy generates better returns, in a safer way.

Investing passively into the right projects provides returns ranging from 8% (at the safer, secured end) to 45%+ for profit-share investments. Building a selective, diversified portfolio of such investments could be a smart move.

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