Introduction to Property Investment Lecture 1 Beatrice Fairley

Investment property features in all sectors of the property market If a building is rented (rather than owner-occupied) it is an investment property What are some examples of investment property? high street shops; offices; industrial and warehouse units; pubs and leisure premise; buy-to-let residential property; farms.

The remainder is owner-occupied One estimate is that around 43% of the commercial property market in the UK is made up of tenanted investment properties. (Isaac & O'Leary, 2011) The remainder is owner-occupied With investment property there is usually a non-occupying owner who is mainly interested in receiving the income in the form of rent & monitoring the capital value

The owner is mainly interested in the investment value the occupier (who could be a business or a household) will be primarily interested in the use value of the property If a property is sought after by occupiers this will tend to sustain the underlying investment value.

Investment market for property cannot be viewed in isolation from other investment markets The application of funds to property reflects competition from other forms of investment The decision to invest in a particular asset will be the outcome of a comparison between the returns and security offered by different types of investment opportunity So- the investors needs to know about and analyse the alternative investment opportunities

Why do people invest in property? The rationale The purchase of an investment property places money at risk in anticipation of receiving future cash receipts

How do investors invest in property? You can indirectly invest in property via buying shares in property companies or investing in Real Estate Investment Trusts or you can invest directly, which usually requires a loan.

Types of investment buy-to-let residential investor takes out a loan (a mortgage) of say 60-70% of the value of the property. The lender assesses the ability of the borrower to meet repayments based on the expected rental stream from the property

Investor who wants to buy an office block Finance is raised by a corporate entity eg a property company (such as Grosvenor Group/ Almacantar/ Westfield) using existing property and assets as collateral.

Is property a large or important part of major corporate investors' portfolios? In the UK property remains a fairly small but important type of investment for individual investors and the financial institutions. An office block bought as an investment may have a high value, however, usually large corporate investors invest in a portfolio of assets which would include shares and bonds. These other assets tend to make up a large proportion of the value held in institutional investment portfolios .

An example

Global investors currently have a target allocation of over 10% of their funds to property

What your coursework will be this term Students will be expected to build a small portfolio of investment property from a range of properties given to them. Students will be given investment and valuation information on each property and they will be expected to make investment decisions about the structure of their portfolio based on their criteria.