They say that home is where the mortgage is, and the average Brit owes £124,000 on their mortgage and should pay it off by the time they’re 69. Now, as lenders lift the upper age limit for mortgages to 80 the only way is up
We really love mortgages in this country. There are more than 11 million of the darling things in Britain which means that many of us are in the jobs we’re doing pretty much exclusively to “pay the bloody mortgage”.
And yet…such is the lure in Britain of owning your own cost-centre, millions of Millennials and Gen Z’ers are desperate to get on to that treadmill.
So maybe that’s why there has been a spate of property-backed investment start-ups recently, set up by said millennials feeling their peers’ pain.
Not that investing remotely in property is a new concept. Back in 1960, the first REIT (Real Estate Investment Trust) was introduced in America and gained some traction here, particularly from the property-obsessed 1980s onwards.
Personally I’ve never particularly been a fan of REITs. These generally-rather-opaque managed funds smell far too strongly to me of layers of fees. REITs allow investors to buy shares in commercial property portfolios (that receive income from a variety of properties (hmm, property management fees, bank fees, legal fees).
To be fair, many REITS have provided a decent, regular income to investors and are worth considering as ‘part of a balanced portfolio’. But my feeling, back in the early 1990s when I was considering these investments was: “Why invest in a property fund when you could just invest directly in your own buy to let and control your own fees?”
Why indeed? I did get my own buy to let and found out. It included the joys of a leaking washing machine, a tenant who was making money from ‘gentleman callers’ and I haven’t even started on the redecoration that will be needed next year. Oh the fun.
So I’m realising that there’s a lot to be said for investing in property that you don’t have to paint. Which is why I have recently become interested in property-backed peer-to-peer platforms that promise regular returns without the blown-up boiler.
Not that I’m going in with my eyes blinded by the brightness of the promised returns. If I see returns of anything over 7% touted for an investment, warning bells tend to start ringing. And that’s what happened when I heard about Blend Network, with its average 10% to 12% returns. Is it kidding? Well, it seems not. It makes the money by lending to (very) small developers – people like you and I – with affordable housing projects.
It lends to developers at around 14%, keeps 2% and gives lenders the rest. It sounds like a high rate but I know from tales of woe I’ve heard from developers who have been charged 20% to 30% for their projects that banks don’t want to bother with them. You know what it’s like: ask for a couple of million and you’re ushered into the manager’s office. Ask for a few hundred thousand and you’re shown the door.
Yes, it’s much riskier than, say, a REIT, but I’ve dipped my toe in. Having invested £1,000, I am now kindly lending some of my cash to two projects.
Then I got talking to British Pearl, doing something similar but different again. This one is the closest to a REIT – you either invest in the mortgage side for a fixed return of up to 4.4% (which you can hold in an Innovative Finance Isa or IF Isa) or you can buy shares in its property business and receive (it says) up to 11.74% a year. Its minimum investment is £100, so I’ve had a go.
An even newer kid on the block is Isa property platform Propio. This one is for mortgage loans only and it has a cautious fund that gives 3% a year, a medium one offering 5% and its ‘adventurous’ fund, which gives you 7%.
Yep, you guessed it, I’ve set up an IF Isa with Propio – the 7% level (3% may be better than the average savings account and 5% even more impressive but “in for a penny, in for as many pounds as I can get” is my motto).
With hundreds of thousands of homes still needed for our burgeoning population, I believe it’s likely to be a few years before the property sector gets too saturated to make half-decent returns. At least I won’t have to replace the guttering any time soon.
Jasmine’s views are her own and do not constitute investment advice.
JASMINE BIRTLES is a financial journalist and founder of MoneyMagpie.com. Email her at firstname.lastname@example.org.