IFEi works with leading Property Investment Providers and Developers to offer interesting and innovative property investment solutions to investors. They can be broadly classified as follows:
These typically include property related investments which give an assured or fixed rental return for a fixed duration. These are ideal for investors who are time poor and want to avoid the time and hassle of managing their own properties. They also suit investors who are attracted to the certainty of fixed returns in the early part of their investment. Examples could include hotel rooms and student accommodation.
These properties give a very high annual yield and can therefore deliver the original investment back after a relatively short period. Typically, such properties will have a minimum yield of 10% and often in excess of 15 to 20%. Such properties tend to be relatively cheap, can be tenanted or untenanted, ready to let or need refurbishment.
The seller of the property is willing to take the purchase price from the seller in equal instalments over a fixed period typically of 10 years. The big advantage to the purchaser is that they do not need to put down a deposit or get a mortgage to buy. Ownership of the property only passes on final payment of all instalments. However, in the meantime the purchaser has full beneficial ownership – straightaway they can use the property or let it out. Often, these properties tend to be located in holiday locations, so they can be ideal for holiday lettings.
Property can be an excellent long term investment to build financial independence and security. However, it also has its own unique risks, drawbacks and disadvantages. When considering any property investment investors should consider the following:
Due Diligence: Before buying any property, it is vital to conduct your own comprehensive due diligence. This minimises the risk of making a bad decision. Investors are responsible for their own due diligence.
Exchange Rate Risk: The best deals are not likely to be found in your back yard. An international and flexible approach to property investing will yield the best results. When investing outside of your home currency you need to consider the additional risk of currency fluctuations. This can have a huge positive or negative effect on your long term returns.
Other Risks: Vacancy periods, bad tenants, unforeseen structural problems or unexpected repairs plus the usual risks of fire, accident etc. Some of these risks can be mitigated by Takaful insurance.
Your Time: Buying property can be a very time consuming process especially when you are trying to find the best property deals. Finding tenants, management, repairs and maintenance all take considerable time. Of course much of this can be contracted to specialists in these areas.
Hassle Factor: Compared to investing in other asset classes, buying property is usually a time consuming and expensive process. That’s just the beginning! Then there’s dealing with tenants, property repairs, unexpected problems etc.
Illiquid: Not a liquid asset and can take a long time to sell. Even when it’s quick sale it will still likely take a few months to get your money. If you need to sell quickly, you will be forced to sell at a low price or structure your sale in an attractive way to buyers.
Costs: Buying property can be a relatively expensive business – you need to take into account real estate broker fees, legal costs, property purchase taxes, valuation fees and of course the opportunity cost of your own time.
Financing: If required, at the minimum sharia compliant financing should be used. However, many of the deals offered do not require financing and are suitable for small investments. In Islam, using interest based finance is strictly forbidden – see home page.
Tax: You need to take into account your current tax jurisdiction and where you are buying. What taxes will be due e.g. Annual Property Tax, Tax on Rental Income, Tax on Capital Gains when selling. This can be a complex area, so you should always seek expert advice.
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