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Property

With a property investment you are often looking to receive rent from a tenant – whether this is a private person in a buy-to-let or a sub-letting arrangement or a company in a commercial property – and also capital growth as the value of the property increases.

If, as an example, you choose to invest directly in a buy-to-let you will be tying your money up and, unlike shares, bonds and cash, it can be difficult to get at your money quickly as you will need to sell the property.

You can invest in a pooled investment that invests in a range of properties. These normally invest in commercial properties.

The commercial property market is different to the residential property market in terms of what causes the price to change. Commercial properties are let out to companies and tend to be on long leases, often 25 years. As a result, the value of the property will often be increased as a result of the length of the remaining lease and the perception of the financial strength of the company paying the rent. If there is a long lease and a financially strong company paying the rent then the owner of the property has a reasonably safe long-term rental income.

Risks

Even though we have had a property boom in the last decade or so, it is important to remember that property prices can – and do – go down as well as up. Also, there is the risk of not having a tenant to pay the rent.

If you are investing in property directly then there are various other risks including, for example, the risk of interest-rate rises if you are borrowing to buy, the risk of problems with tenants and the risk of needing costly repairs. Investing directly is a major undertaking and you should do your homework first.

Buying and selling

If you have invested in a property directly then it can take some time to sell and there are costs involved. If you invest in property through a pooled investment then you can usually sell much more quickly, although pooled investments often reserve the right to delay payment to allow time to sell properties if needed. The delay is typically up to six months, but it may sometimes be longer.