Property Investment Niches Compared

Property is a hugely popular asset class and it’s easy to see why. Unlike most equities, you can often have both growth and income. It is, however, important to choose the right form(s) of property investment for your goals and situation. Here is a quick guide to what you need to know.

Options for property investment

Generally, when people talk about property investment, they mean direct property investment. This is when you buy a property and monetize it in some way, usually by renting it to someone else. The main niches here are residential property, vacation property, and commercial property.

It is, however, definitely worth noting that you also have the option to invest in property indirectly. This basically means investing in property-related companies. If you’re on a limited budget and/or inexperienced, this can actually be a better way to go. It gives you protections such as GIPS compliance regulation, and compliance requirements.

With direct property investment, you tend to be very much on your own. That said, there are blogs and forums with plenty of great advice. What’s more, there’s no magic to learning about property investment. A lot of it is basic common sense.

Residential property

The residential property sector is so big that it can be divided into multiple subsectors. These include student property, property for sharers, property for young adults, family homes, and property for retirees. Many of these sub-sectors can be subdivided even further. For example, the young adult niche could be split into singles and couples.

Residential property rentals tend to be very tightly regulated especially in cities. For practical purposes, regulation essentially just means being able to show that you have acted responsibly. It is often, literally, a box-ticking exercise. You just need to keep the paperwork to demonstrate that you were right to tick the boxes.

On the plus side, the main reason why residential property rentals are so tightly regulated is that there is such high demand for them. This means that rental properties require very little in the way of marketing. Furthermore, once they are let, regular cleaning can be left to the tenants. You will just be responsible for maintenance and repairs.

Vacation property

Staycationing may come off the boil when international travel reopens. It is, however, extremely unlikely that the market will disappear completely. A vacation property can make excellent yields. These yields do, however, tend to be concentrated at certain times of the year. This means that any adverse conditions, like bad weather, can have a major impact on them.

Vacation properties also tend to require a lot of marketing plus a lot of care and maintenance. At a minimum, tenants will expect the property to be thoroughly clean when they arrive. You can’t rely on the outgoing tenant doing their cleaning before they leave. You’ll therefore either need to do it yourself or arrange for a cleaning company to service it.

Commercial property

It’s an open question how much demand there will be for office space and retail space over the coming years. It is, however, practically guaranteed that there will be continued demand for other forms of commercial space.

Commercial property has a lot to recommend it. In particular, leases tend to be a lot longer than for residential lettings. Investing directly in commercial property can, however, be quite a significant commitment. It can therefore be easier to invest indirectly, for example through buying shares in a company that manages commercial property.