Non-Direct Property Investment

Non-Direct Property Investment

So, you don’t want to be a landlord and have the day-to-day headaches of managing tenants, managing cash flow and property maintenance requirements, but you do want to diversify into property.

There are options that you might not have heard of – that are cheaper and a lot less hassle.

You can invest through property syndicates, the share market, unlisted managed property funds or other people’s mortgages. 

These give you the advantages of property ownership without having to purchase and manage the property yourself. 

The major differences with these forms of direct investment is that you are not able to have any sort of management control, and you cannot use these types of investments as security to borrow against.

Property Syndication

Property syndication is an affordable way to buy a small piece of a commercial or industrial building.

It’s a proportional ownership model, where a company buys properties and splits them into parcels for resale. Investors buy a proportion of the scheme, say NZ$50,000 worth of it, and receive returns based on their investment.

The Share Market (Listed or Managed Funds)

You can buy a small part of a building you couldn’t afford to own yourself by buying shares in a Real Estate Investment Trust, known popularly as a REIT.

These are sharemarket-listed companies that own and manage property.

Buying and selling shares is easy on the stock exchange. You won’t get capital gain, but you may get dividends paid out, and your shares can rise in value so you might sell them at a profit.

Unlisted Property Funds

Some unlisted companies also own and manage property funds for investors.

These funds are usually made up of several properties – offices, shops, or factories. Investors buy shares in the funds, which can grow in value, and most pay regular dividends (returns).

These funds give you access to large buildings, with the benefit of a sustainable return, typically higher than you’d expect in the listed property sector.

Other People’s Mortgages

If you don’t want to own a rental property, why not invest in someone else’s mortgage?

The introduction of peer-to-peer lending rules and new technology has made it possible for companies to split mortgages across a number of investors.