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Forget buy-to-let! I’d buy this unique property share instead

It’s fair to say that many buy-to-let investors have done well over the past couple of decades. But despite the recent temporary easing of stamp duty, new tax rules and other requirements have made the sector look less attractive than property shares. 

On top of rising costs, the property market looks toppy to me. My guess is the next two decades may prove to be less lucrative for those entering the game of investment property ownership now.

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But another big factor is the sheer amount of effort and time it will take you to buy, own and manage a property for letting. You’ll be exposed to many risks and uncertainties. And, like me, you may conclude that it’s better to spend your time in other pursuits.

Passive investing in property shares

Happily, we can invest in the theme of property passively. It’s as easy as buying the shares of one or more of the property-backed stocks listed on the London stock market. Just do your research, make your selections, and buy some shares. Then hold them with the same tenacity you’d cling to a property you own for rent.

Over the next 20 years or so there’s a good chance your investment will rise in value. The returns will likely come from shareholder dividends and gains in share prices because of the underlying progress in the business.

And the Covid-19 crisis has driven down the price of many property-backed stocks because of the short-term challenges faced by the sector. It’s true that property companies are sensitive to cyclicality in the economy. But the coronavirus pandemic may have created the conditions for the current cycle to bottom out. Indeed, it could be a good time to go shopping for property shares right now.

For example, I like the look of “the UK’s leading developer and manager of retirement communities,” McCarthy & Stone (LSE: MCS). But today’s half-year results report reveals to us some dire figures for the six months to 30 April.

Indeed, legal completions for sales and rentals dropped by 44% compared to the equivalent period the year before. Revenue plunged by 64% and the firm lost underlying earnings per share of 4.1p compared to making 2.9p last year. And because of the effects of the coronavirus crisis, the interim dividend is toast.

Good value despite poor trading

However, worse figures may still be to come. The company reckons the full financial effects of the crisis won’t show up until the second half of the year. Indeed, sales and building activities halted during the lockdown. And the firm is being very careful about how fast it’s reinstating operations because most  customers are elderly.

But today’s news hasn’t rattled the share price, which remains steady as I write. I reckon that suggests the market may have already factored in the trading negatives. Meanwhile, with the share price near 75p, the tangible book value sits just below 0.6, which looks like good value to me.

Looking ahead, the company serves a growing sector. And the directors think it’s well-placed to capitalise on this exciting opportunity.

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Kevin Godbold has no position in any share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.