Property is traditionally seen as a safe investment by British savers. We're all familiar with the residential market, but the commercial market is less understood. To actually buy a commercial property requires wealth, but collective investment funds offer exposure even for those of modest means.
Collective investment funds will invest money in one of two ways: directly or indirectly. Both spread the risk, although direct investment in bricks and mortar is less vulnerable to the whims of the market than indirect investment.
Commercial property, such as shops, offices and industrial buildings, has several advantages over residential. Firstly, the average life of a commercial lease in the UK is eight years, as opposed to six months; secondly, the tenants are less likely to flit; thirdly, the rents themselves are much higher and subject to annual increases.
There are risks associated with direct property investment. In 2008, when America's sub-prime mortgage crisis sent waves of panic around the world, the value of some commercial property funds in the UK fell by up to half.
Indirect investment funds are even more vulnerable to the whims of the market as they don't enjoy the same benefits of diversification. Most take the form of unit trusts and open-ended investment companies (OEICs).
Both unit trusts and OEICs are open-ended, in other words there's no limit to the number of units or shares that the fund manager can issue. If the demand for units increases they simply buy more property, and if an investor wishes to redeem their holding they sell them back to the fund. This can lead to problems, such as the fund manager having to sell assets at a low price, but it's more user-friendly than buying and selling shares on the stock market.
The majority of open-ended funds are also real estate investment trusts. In essence, this means that they don't pay corporation tax on assets, as long as they pay at least 90 per cent of profits to their shareholders. Dividends are taxed at either 20 or 40 per cent.
When an investment fund issues a fixed number of shares it is called a closed-end fund. Unlike open-ended trusts, if a member wants to either buy into or sell out of the fund he must do it through the stock market. The tax on dividends is the same as for most other investments, i.e. 10 or 32.5 per cent.
Commercial property prices are now recovering after the sub-prime mortgage crisis of 2008, and an increase in revenue from rents is expected as economic conditions improve. Furthermore, the recent lack of investment in property should increase the value of existing buildings.
Collective investment funds will invest money in one of two ways: directly or indirectly. Both spread the risk, although direct investment in bricks and mortar is less vulnerable to the whims of the market than indirect investment.
Commercial property, such as shops, offices and industrial buildings, has several advantages over residential. Firstly, the average life of a commercial lease in the UK is eight years, as opposed to six months; secondly, the tenants are less likely to flit; thirdly, the rents themselves are much higher and subject to annual increases.
There are risks associated with direct property investment. In 2008, when America's sub-prime mortgage crisis sent waves of panic around the world, the value of some commercial property funds in the UK fell by up to half.
Indirect investment funds are even more vulnerable to the whims of the market as they don't enjoy the same benefits of diversification. Most take the form of unit trusts and open-ended investment companies (OEICs).
Both unit trusts and OEICs are open-ended, in other words there's no limit to the number of units or shares that the fund manager can issue. If the demand for units increases they simply buy more property, and if an investor wishes to redeem their holding they sell them back to the fund. This can lead to problems, such as the fund manager having to sell assets at a low price, but it's more user-friendly than buying and selling shares on the stock market.
The majority of open-ended funds are also real estate investment trusts. In essence, this means that they don't pay corporation tax on assets, as long as they pay at least 90 per cent of profits to their shareholders. Dividends are taxed at either 20 or 40 per cent.
When an investment fund issues a fixed number of shares it is called a closed-end fund. Unlike open-ended trusts, if a member wants to either buy into or sell out of the fund he must do it through the stock market. The tax on dividends is the same as for most other investments, i.e. 10 or 32.5 per cent.
Commercial property prices are now recovering after the sub-prime mortgage crisis of 2008, and an increase in revenue from rents is expected as economic conditions improve. Furthermore, the recent lack of investment in property should increase the value of existing buildings.
About the Author:
If you are interested in knowing more about commercial property for investment, visit the blog. www.housemarketwatcher.co.uk has all the latest info on commercial investment , public houses and industry news.
0 التعليقات:
إرسال تعليق