Revealed: The best way to invest in property in the UK

Bilaal Mohamed reveals the simplest and easiest way to invest in property in the UK.

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Are you a sucker for Rich Lists? Despite feeble attempts to resist, most of us can’t help look up the net worth of those blessed with more wealth than us. And many of them are ‘property tycoons’. Indeed President Donald Trump is often described as one (or real estate mogul).

Let’s get started

So how do we get started building our very own property empire? Trump told voters his father gave him a ‘small’ loan of $1m to get started. Well, my father came to this country with £5 in his pocket, and left his sweat on the factory floor before he retired, so a mega-loan from him is certainly out of the question and I’m sure most of us are in the same position.

Is there a more realistic alternative? Buy-to-let has been popular over the past decade or so. Pop along to your local bank, persuade the manager to grant you a buy-to-let mortgage, then sit back and let the income flow in. Rinse and repeat. Simple in theory, but not so much in practice.

Tenants from hell

By the time you’ve found a property, dealt with estate agents and solicitors, and found tenants, you’ll have aged considerably. After drawing up contracts and sorting out Council Tax, gas and electric, you’ll have aged even more. By the time your first rent cheque comes in, you may have gone grey. And of course if you’re unlucky enough to have the tenants from hell, grey hair will be the least of your worries.

But there’s a quicker, simpler and less stressful way to invest in UK property, and that’s to buy shares in Real Estate Investment Trusts or REITs. Essentially REITs are property firms that invest in all types of property such as commercial, residential or retail buildings, with the main aim of producing rental income and distributing proceeds in the way of dividends. They can be traded at the click of a mouse just like shares in any other UK-listed company.

It’s all REIT

There are currently over 20 REITs listed on the London Stock Exchange, the two largest being Land Securities Group (LSE: LAND) and British Land Company (LSE: BLND). Perhaps not the most glamorous of names, but between them, these two property firms own some of the most prestigious real estate in the country.

With a current market value of over £7.5bn Land Securities is the largest commercial property company in the UK, boasting London assets such as Piccadilly Lights and Westminster City Hall, with an extensive retail portfolio that includes the Bluewater Shopping Centre and Accor Group Hotels. Land Securities offers generous dividend payouts that have continued to rise since 2010, which at current levels support a prospective dividend yield of 3.7%.

Perhaps a slightly better alternative to consider might be the UK’s second largest property firm, British Land. It owns a high quality portfolio that includes the famous Cheesegrater office building in the City of London and the Meadowhall Shopping Centre in Sheffield. British Land has also been rewarding shareholders with progressive dividends since 2010, and offers a superior yield of 4.9% for the current year to March 2017, rising to 5.1% for fiscal 2018. There are however plenty more REITs out there to whet your appetite.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Bilaal Mohamed has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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