How the changes to the Buy To Let rules are forcing property investors to look for alternatives. And how we fit in.

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Finding the right property to invest in has historically been an arduous task. The best opportunities aren’t always close by, and investors are often forced to look beyond local neighbourhoods to find a suitable property. However, the attractiveness of property has often made this effort worthwhile for many investors.

Recently however, investor opinion has been shifting. Changes to the UK Buy to Let (BTL) market have had a significant impact on the sector’s attractiveness to investors. Various factors, including the introduction of a 3% surcharge in stamp duty from April 2016 and the costly, time-consuming process of sourcing, financing and managing residential property, have contributed to an 80% drop in BTL property investment, from £25 billion in 2015 to just £5 billion in 2017.

From a more holistic standpoint, the turbulent global political scene, including Brexit, has contributed to volatility in global equities and played a pivotal role in stagnating property prices in the short term. With so much uncertainty about how the future will unfold, people are understandably reluctant to invest large amounts of time and money in property. Such transient times call for a new model and a robust investment process to give investors the tools to adapt to and take advantage of market fluctuations.

All things considered, it begs the question - is property investment still worth it?

The rise of technology in property investment Long term market trends and the value of asset-backed investments suggest that carefully selected property continues to hold an appeal as part of an investment portfolio. So how can investors get exposure to property without being penalised by regulatory changes and arduous processes?

For this to happen, the traditional way of doing things needs to be challenged. In a recent report by PwC, Emerging Trends in Real Estate, it is said that “the real estate industry is gradually recognising the need to adapt to the disruptive change that technology is bringing about in the sector”. Indeed, investors are already turning to new models that can offer maximum benefits with minimum hassle.

An example of this model is investing in property via digitally-exchanged shares rather than a physical asset. While there are currently options to invest into a property fund or REIT, people now have the option of investing in an individual property of their choosing, digitally and easily.

The SPV model One approach is to use a Special Purpose Vehicle (SPV), which can own a property, service its associated debt, and strike contracts for all necessary management services. The investor can access the returns of the SPV through a share purchase, without incurring any of the associated inconvenience of hands-on property management.

By investing in a financial asset rather than a physical property, the investor gains exposure to the property market without taking on the obligations of personally owning the property. For the investor, the approach is simpler, quicker, and requires much less work. When the time comes, the investment in the property can change hands and tenants would experience no disruption at all as it’s a simple, digital transfer of the shares in the SPV.

At Plotify, we use a unique SPV structure to create ‘Plots’ for each individual property, an investment model we believe is truly innovative. In doing so, investors can select a pre-vetted property based on their own investment goals, and benefit from exposure to the property market, without having to take on the process, rules and regulations themselves.

Less time, lower financial outlay, less hassle. We think this model revolutionises access to residential property investing.

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Plotify Financial
9.27.19

Property - an appealing investment, if only it wasn’t so onerous?

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