The best way to invest in property when you only have a little money is to buy a REIT (Real Estate Investment Trust) which are shares that have exposure to the property market. In this guide, we will explain what REITs are, how to invest in them and provide a list of some of the largest REITs in the UK.
Best ways to invest in property with a small amount of money
- REITs (Real Estate Investment Trusts)
- Shares that have exposure to the property market
REITs (Real Estate Investment Trusts)
REITs are like shares listed on the London Stock Exchange but are funds that have invested in property where the bulk of their income comes from rental income, which must be shared between shareholders through dividends. One of the main benefits of REITs is that you can invest in them with very little money. You can buy them just like you would buy shares in Lloyds bank. So, if you only have £1,000 to invest, that is not enough to buy a buy-to-let property, but it is enough to buy £1,000 worth of a REIT.
Here are five of the biggest real estate investment trusts in the UK:
|Land Securities Group PLC||£5.91bn|
|British Land Company PLC||£4.96bn|
|Unite Group PLC||£4.69bn|
|Derwent London PLC||£3.47bn|
Interested in investing in REITs?
- How to buy REITs (real estate investment trusts)
- What out for poorly managed REITs like the Home REIT
- How to speculate on house prices going up & down with property ETFs
- Full list of UK REITs on the LSE including market cap and price history
Top tip: Spread your risk by investing in several different REITs. Hargreaves Lansdown provides a great platform with access to a wide range of REITs listed on the London Stock Exchange.
Peer 2 Peer Lending
Peer 2 peer lending lets you invest in property in small amounts as you are essentially lending property developers money to build houses or flats. However, even though some platforms are regulated by the FCA, your funds are not protected by the FSCS so if the platform or developer goes bust you can end up with nothing. Peer 2 peer investing has grown in popularity as they are able to offer bank-beating interest rates to tempt savers.
Peer 2 peer property investing has been known in the past as mini-bonds, where the FCA has banned advertising them to retail investors because of the risks involved.
If you are only interested in investing in houses and flats, then you may be able to borrow the entire cost of a property with a 100% Mortgage. A 100% mortgage is where a bank or building society will lend you the entire value of a house or flat.
Skipton Building Society offers 100% mortgages, but these are not available for investors, only people with a solid track record of paying rent and who want to live in the property they are buying. The key downside of 100% mortgages though is that if the housing market falls, you will be in negative equity, so if you have to sell your property you will end up owing the bank money.