As the gurus at Motley Fool sound the death knell for Buy-To-Let, calling it an “expensive distraction” and point investors once more to the Stock Market, some more canny investors are sitting back and wondering if there is a third way.
After all, there are good reasons why we British have traditionally invested in property. And yet the FTSE also has very sound reasons to commend it.
But for those who want double digit returns but without the bumpy stock market ride, there is a way to achieve the benefits of both property investing and stock market investing in one, and reduce the drawbacks of both.
Secured on property, but more liquid than buying bricks and mortar – and less volatile than stocks and shares – it consistently brings higher returns than Buy-To-Let, without the overheads, management and conveyancing fees, refurbishment and maintenance costs and stamp duty.
Motley Fool suggests that in every respect other than the ability to borrow to invest, the Stock Market beats Buy-to-Let. And it surely does.
However, loan-based property crowdfunding has many of the advantages listed too. Investing in property developments through CapitalStackers, for instance, can bring you highly attractive risk weighted returns in the time it takes to build a row of houses. Investors in the Foss Place development in York made annualised returns of between 8.5% and 22.5% in just eight months – all within a sensible Loan to Value range of 58% – 75%.
Like stocks and shares, you don’t have to have saved or borrowed huge sums to get started – you can participate in a building development scheme from just £5000.
And whilst your loan investment is as solid as the houses being built, it’s also more liquid. You can invest in a CapitalStackers scheme almost as quickly as you can buy shares (with the assurance that the due diligence has already been done for you) and if you want to free up your cash, you can sell part or all of your investment on their secondary market.
Although investing in Buy-To-Let is verboten for pension schemes, if you have a SSAS (or access to one) CapitalStackers gives you a route to invest in the same asset class by lending on residential property developments and take your gains free of tax.
But there’s one important advantage that investing through CapitalStackers has over the Stock Market, and it’s this: when you buy shares, you bear all the risk. If they drop in value, your capital gets burnt. There’s no firewall, no cushion, no contingency.
However, with CapitalStackers, even the highest risk layer is cushioned by the developer’s own equity and profit, and you get to choose yourself the level of risk you want to take and the corresponding rate of return.
All of which points to a very healthy alternative to both BTL and the markets. As Warren Buffet once said, “If you can’t invest in the stock market for ten years, don’t invest in it for ten minutes”, and of course, it’s difficult to make any money out of rental properties in the short term. But CapitalStackers can bring you attractive, typically double digit, returns in as little as 6-24 months. In short, as long as it takes the developer to finish a building.
Now, isn’t that worth considering?