Four ways to invest in property without becoming a landlord

SPONSORED BY TRADING 212
The Independent Money channel is brought to you by Trading 212.
The appeal of managing your own buy-to-let portfolio has been hit in recent years with increased taxes and restrictions on reliefs that have dented landlord profits, as well as increased regulations.
The Renters' Rights Bill currently going through Parliament will also introduce tougher requirements to evict renters and limit mid-contract rent rises. All this is driving many landlords to exit buy-to-let.
But the returns from property can still be attractive, especially compared with volatile stock markets.
Luckily, there are ways to invest in property without the added responsibilities and headaches of being a landlord.
Here is what you need to know - with plenty of options to start smaller than having enough for a full house deposit.
From housebuilders such as Persimmon to property websites such as Rightmove, there are plenty of listed companies on the London Stock Exchange in the housing sector that you could put money into.
You would then share in their success if the share price grows and if they pay dividends. Of course, you will also lose money if their share price drops.
There are extra responsibilities with shares though. You will need to build a diversified portfolio across different sectors so that you don't lose all your money if the property sector crashes.
There may also be fees to pay for holding your shares on an investment platform, which can eat into your returns.
Property funds
If you don't have the time or confidence to research shares, you can get exposure to the property market through property funds.
These are run by fund managers who will build a diversified portfolio typically invested in commercial properties such as offices, warehouses, industrial units or shopping centres – rather than housing. Some will either invest across a mix of property sectors, others special in a narrow part of the market or a particular region.
Jason Hollands, managing director of investment platform Bestinvest, said: 'Physical property funds offer investors diversification beyond equities and bonds and a stream of rental income can be useful for those who are retired.
'With many people already having significant exposure to residential property through their own home and mortgage, investing in a commercial property funds provides a slightly different dimension. Here they can benefit from the security of long leases by business tenants and accompanying rental income.'
When choosing a property fund, Hollands said the quality of the tenants and the length of their unexpired leases - the longer the better - low vacancy rates and the exposure to attractive locations are important considerations over portfolio resilience.
One big risk though is that property is an illiquid asset so you cannot sell in a hurry in the way you could decide to ditch some shares.
Hollands added: 'A fund can't part-sell an office block or warehouse it owns and in times of uncertainty this may be difficult to achieve at a reasonable price. Open ended property funds have therefore experienced periods in the past when they have had to suspend dealing – the ability for investors to take their cash out – when large numbers of investors want to take their cash out at the same time.
'Even in stable times, such funds have to hold significant cash balances to address day to day demands for possible withdrawals which can water down returns.'
There are also investment funds and exchange traded funds that invest in property stocks. Both types of property fund will have manager and platform fees to consider.
An alternative to property funds are real estate investment trusts (REITs).
This is a type of investment trust - backing a mix of commercial properties - that is listed on a stock exchange.
Rather than your money going directly into properties, you are purchasing a share in the trust and share in the ups - as well as the downs - of its share price and market performance.
Many REITs also pay regular and attractive dividends, often quarterly.
Nick Britton, research director of the Association of Investment Companies (AIC), said: 'Being a landlord isn't for passive income – you will find yourself running a property business, grappling with complex tax, legal and regulatory requirements. By contrast, investing in a REIT is as easy as buying any other share.
'A particular perk is that REITs are very tax-efficient – there is no tax to be paid by the REIT itself, so if you hold REIT shares in an ISA or pension you'll effectively receive rental profits tax-free.
'Although you can sell the shares at any time, REITs should still be seen as a long-term investment. Their share prices will fluctuate and when the property market is in the doldrums, this will be reflected in the prices. You need to be patient and ideally take a five to 10 year view.'
Property funds and shares can be held in an ISA, so any returns can be taken tax-free, unlike direct rental income.
Peer-to-peer lending
You could also fund buy-to-let or development loans directly through peer-to-peer lending platforms such as Kuflink and LandlordInvest.
These can offer double digit returns for funding landlords or developers directly.
However it can also be more risky and you need to check the P2P lending platform is regulated by the Financial Conduct Authority (FCA).
Risks include borrowers falling into arrears and even defaulting, potentially leaving you with nothing. There is also no Financial Compensation Scheme (FSCS) protection if a platform goes bust.
There are also platforms such as TAB Property that provide fractional ownership of assets such as hotels and office spaces, as well as residential property.
Any returns earned from a property's income will be paid in proportion to your stake.
Duncan Kreeger, chief executive of TAB Property, said: 'Fractional ownership now allows investors to enter high-grade real estate markets without the usual high minimum investment thresholds. This approach diversifies exposure and mitigates the risk of putting all your eggs in one basket.
'For anyone considering this type of diversification, my advice is to start with a clear investment plan. Determine your investment horizon and desired returns. Look for platforms offering access to diverse asset classes and conduct thorough research on each opportunity.
'Understand the terms, risks, and potential rewards associated with your chosen investments.'
When investing, your capital is at risk and you may get back less than invested. Past performance doesn't guarantee future results.

Try Our AI Features

Explore what Daily8 AI can do for you:

Learn with AIFact CheckingText to SpeechAI Summary

Related Articles

Daily Record

5 days ago

• Daily Record

HMRC issues warning as thousands urged to 'withdraw' pension after new rule change

The rule change has prompted many savers to reconsider their withdrawal strategies. Under current rules, once people hit the age of 55, they're entitled to take out 25 per cent of their pot tax-free UK households are currently grappling with soaring living costs and political instability. meaning many are left increasingly tapping into their pension savings ahead of time. It comes as figures from HMRC have revealed that a staggering £2.2billion was withdrawn last year. The data shows a notable rise in activity among those aged 55 to 56, with 120,000 making taxable withdrawals in 2023-24. This equates to an 18 per cent rise over the last five years. ‌ Under the existing regulations, individuals can access 25 per cent of their pension pot tax-free once they reach 55, up to a maximum of £268,275. Withdrawals above this limit are taxed as income, as reported by the Mirror. ‌ Jason Hollands of Bestinvest weighed in on the situation, noting: "Demographic patterns will be a factor. But other possible influences are a rise in business exits and second property disposals ahead of the election enabling more people to take early retirement." Daniel Hough from RBC Brewin Dolphin, looking at it from a wealth management angle, remarked: "Retirement is lasting longer for people – by accessing their pensions at 55, there will be more pressure on providing a sustainable income throughout retirement, however long it may last." Experts warn of risks as numerous savers tap into pensions before retirement, with Andrew Tricker of Lubbock Fine Wealth Management stating, "The large number of savers withdrawing from their pensions before actually retiring is very concerning. Many of them are withdrawing too much – and too early." Financial specialists caution that savers might overspend to avoid inheritance tax due to new Labour Party regulations. Kate Smith of Aegon said, "The expectation is that those individuals with large estates will access their pensions earlier to avoid inheritance tax, and later life tax planning will become increasingly important." ‌ The plans have caused "concern and some confusion" for those nearing retirement, according to Mr Hough. Chancellor Rachel Reeves had announced the end of inheritance tax reliefs on pension savings by 2027, prompting many to reassess their pension drawdown strategies, as Britons can currently pass on pension wealth tax-free. How can I find out how much State Pension I could get? You can get a State Pension forecast online from the Check your State Pension service here. This provides personalised information, including your State Pension age, an estimate of how much State Pension you may get at that point and if you can increase this amount. It also allows you to view your National Insurance contribution history. More information about deferring your State Pension can be found on the website here.

Daily Mirror

6 days ago

• Daily Mirror

Thousands urged to 'withdraw' pension cash after new HMRC rule change

The rule change has prompted many savers to reconsider their withdrawal strategies. Under current rules, once people hit the age of 55, they're entitled to take out 25 per cent of their pot tax-free Amidst rising living costs and political uncertainty, UK households are in a rush to dip into their pension pots early, with hundreds of thousands withdrawing a whopping £2.2bn last year. Official HMRC figures have highlighted a significant surge, showing that 120,000 people between the ages of 55 and 56 made taxable withdrawals from their pensions in 2023 - 24, marking an 18 per cent increase over the past five years. Under current rules, once people hit the age of 55, they're entitled to take out 25 per cent of their pension pot tax-free, subject to a ceiling of £268,275. Beyond this threshold, any further withdrawals incur taxation as income. ‌ READ MORE: Simple airport duty free trick to bag cheaper beauty and alcohol before arriving Investment expert Jason Hollands from Bestinvest commented on the trend, suggesting: "Demographic patterns will be a factor. But other possible influences are a rise in business exits and second property disposals ahead of the election enabling more people to take early retirement." ‌ From the perspective of wealth management, Daniel Hough of RBC Brewin Dolphin pointed out: "Retirement is lasting longer for people – by accessing their pensions at 55, there will be more pressure on providing a sustainable income throughout retirement, however long it may last." Highlighting potential risks associated with this behaviour, Andrew Tricker from Lubbock Fine Wealth Management, who procured the data, saod: "The large number of savers withdrawing from their pensions before actually retiring is very concerning. Many of them are withdrawing too much – and too early." Financial specialists also cautioned that savers might feel impelled to overspend from their pension funds to sidestep inheritance tax charges stemming from new regulations introduced by the Labour Party government. Kate Smith from the pensions outfit Aegon commented: "The expectation is that those individuals with large estates will access their pensions earlier to avoid inheritance tax, and later life tax planning will become increasingly important." Mr Hough expressed that the proposals sparked "concern and some confusion" for those approaching retirement age, reports Birmingham Live. Chancellor Rachel Reeves had previously broadcast the discontinuation of inheritance tax reliefs on pension savings come 2027. At present, Britons are at liberty to bequeath their pension wealth devoid of tax, yet this policy alteration has incited many to revisit their strategies for drawing down their pensions.

Telegraph

08-06-2025

• Telegraph

Cash savers exposed to risky investments by popular Isa providers

Have you or a loved one lost money trading CFDs or other complex financial products? Get in touch at money@ to share your stories. Cash savers attracted by competitive interest rates are being exposed to high-risk investment products by popular Isa providers, experts have warned. Two popular Isa providers, Trading 212 and IG Group, offer a product that results – according to their own research – in the majority of investors losing money. Contract for differences, or CFDs, are complex and highly risky trading products that allow investors to speculate on the price movement of an underlying asset without actually owning it. Traders can also use leverage to boost their potential winnings, but this in turn raises the chances they will lose money. According to trading platform Trading 212, 77pc of its retail customers lose money when trading spread bets with CFDs. IG pegs its own figure at 71pc. Trading 212 is a popular savings and investment app, with its cash Isa and stocks and shares Isa promoted across personal finance websites including MoneySavingExpert and Which?. The app pays 4.35pc interest annually on uninvested cash in its stocks and shares Isa. This figure was 4.6pc until recently, just shy of the top-paying cash Isa at 4.85pc. Trading 212's cash Isa, meanwhile, pays just 4.1pc, meaning its customers are better off keeping their money uninvested in its stocks and shares Isa. Yet savers with a stocks and shares Isa who opt not to invest and solely earn interest on cash may be chided by the following notification: 'Keep your benefits active. We noticed you haven't traded for a while, yet you are still earning interest on your cash. 'We wanted to remind you that your Trading 212 account is primarily an investment account. It's designed for investing, rather than for holding cash as in a traditional savings account.' IG – another trading platform that primarily offers high-risk products such as CFDs – offers a stocks and shares Isa that pays interest of 4.25pc on uninvested cash. Savers that signed up in May could earn a market-busting 8.5pc, but they are forced to trade to earn the cash interest rate. Savers may also be unaware that interest paid on these savings is not necessarily earned in the traditional sense, and comes with fewer protections. Those who opt into earning interest on uninvested cash see their money – at least in part – invested in qualifying money market funds. While these funds are low-risk, cash held within them is not covered by the Financial Services Compensation Scheme, unlike the interest offered for cash Isa savers. Trading 212 customers with a cash or stocks and shares Isa will also frequently see the CFD section of the app when switching between their accounts, or accessing menu screens. Darius McDermott, managing director of Chelsea Financial Services, said: 'Trading 212 has built much of its platform on its cash [Isa] product. You get into the market with one competitive product and then transfer your customers to other kinds of products.' Since IG launched its stocks and shares Isa in 2014, it has seen a 175pc increase in active clients, according to analysis of its data by investment platform Lightyear. Holly Mackay, founder of independent financial platform Boring Money, said: 'Trading 212 [has] had success in attracting and engaging new investors – whether through cash Isas or just better apps and user experience than traditional players. 'This better digital experience combined with very low costs – in some cases no costs at all – has seen [these platforms] add huge numbers of new customers.' In line with Financial Conduct Authority (FCA) rules, if users opt to start trading CFDs in the Trading 212 app, they are warned that '77pc of retail investor accounts lose money when trading with this provider'. Before they can start trading CFDs, users must also answer just five multiple choice questions about the investment product, and disclose whether they have any experience in the area. But these steps can be breezed through quickly, and the platform carries out no other checks to verify whether a customer is a professional with trading experience or not. The FCA's Consumer Duty, which took effect in July 2023, states that firms should aim to continuously address issues that risk causing consumer harm, and must act to deliver good outcomes for retail customers. McDermott said: 'I do not believe that CFDs should be readily available to the majority of retail investors – you should be a professional trader with a high net worth to use them. People who are saving for medium and long-term goals shouldn't be exposed to CFDs.' Mackay added: 'I think we do need to reconsider the disclosures around CFDs and crypto, which are increasingly being offered up alongside much less spicy investment products, but have the potential to go very wrong, very fast.' 'CFDs have their roots in gambling' In April, IG Group completed its acquisition of Freetrade, a popular stocks and shares Isa and investment app, gaining access to the platform's 720,000 customers. Freetrade, like Trading212, is known for its low fees, and is a popular option for retail investors. Freetrade has not previously offered CFDs, and the platform has not hidden its disapproval of such high-risk products in the past. One blog post on the Freetrade website from 2017 warned customers that 'CFDs are hazardous to your wealth'. Another, from 2024, read: 'CFDs have their roots in the UK gambling sector and they are designed for people to take short-term, high-risk bets on price movements in the financial markets. 'Freetrade does not offer CFD margin trading accounts as we believe they do not provide value to investors or encourage the sort of investing habits that usually provide positive financial outcomes over the long term.' A spokesman for Trading 212 said: 'Each product that Trading 212 offers has its own specific target market, i.e. what type of customer we consider the product has been designed for, and how the product will deliver on the customer's expectations. 'In order to ensure those products reach the intended target market, we have created a clear separation between each product type via separate onboarding journeys and distinct accounts. 'Each onboarding journey incorporates specific hurdles, such as risk tolerance, investment objectives, experience, knowledge tests and vulnerability assessments to ensure the customer is aware of the product risks and sufficiently capable, both in knowledge and financial resilience, to accept those risks. 'If a prospective client does not meet the requisite thresholds, they will not be able to use the product. This is in line with the FCA's Consumer Duty.' A spokesman for the FCA said: 'All financial promotions must be fair, clear and not misleading. Trading platforms must make sure that their customers can make well-informed investment decisions by providing appropriate risk warnings.'