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Defining 2 Popular Forms Of Property Investment: Ownership And Lending.

Farrbury Capital | July 23, 2019

The term “Investment” has a number of connotations, the definition is subjective dependent upon the investor’s motivations and criteria. There is no right or wrong investment, it depends solely upon the individual’s expectations and understanding of exposure to various risks associated with the opportunities presented.

Ownership

This is the most traditional form of property investment, the purchase of Real Estatehouses or apartments that are purchased in either a complete or off plan state for the purpose of renting or reselling. Whilst this has always been considered the “safe” option, there are still a number of risks involved. Vacancy periods, unexpected maintenance, interest rates and unruly tenants are but a few examples which can not only diminish profit but ultimately write it off altogether.

“Diversification in any investment portfolio is important, not only to spread risk, but also to identify the potential within new opportunities brought to market. The property industry is constantly evolving, offering developers, lenders and investors the ability to benefit from each other’s requirements and successes.”

James Hayward, Investment Director, Farrbury Capital Partners

Lending

Lending investments allow you to be the bank. The common misconception is that these are a “higher risk” investment, however, it is again vital to perform the due diligence in to how the proposed returns are generated. More often than not a large developer with a substantial track record and significant unencumbered assets combined with a comprehensive development pipeline, are quite capable of paying a yield higher than that of a “traditional” investment. Whilst it benefits the investor with the higher rate of return and multiple securities in place, it also benefits the developer as short-term lending such as mezzanine finance or bridging loans can easily cost a developer over 38% annually of the funds borrowed. Equally, funds that are raised from a financial body such as a bank or specialist lender, would be secured in the same way that private investors funds are. Fundamentally, if the correct processes and securities are in place, one of the safest, yet profitable forms of investment are as a lender.

“Investing in certain markets can be a daunting prospect, unsure of whether you will see a rise or fall in the value of your funds. The opportunities within the property industry however, when structured correctly, can offer piece of mind in that regard. With investments not dependant on environmental factors or geopolitical events, it can offer somewhat of a safe haven from the notorious pitfalls.”

 James Hayward, Investment Director, Farrbury Capital Partners

Please contact Farrbury Capital Partners by emailing info@farrburycapital.com or calling 0203 973 1510 for further details.