Types of real estate investment companies to invest in

Real estate investing is a great way to earn extra profits. This is why many want to enter the country’s real estate market. Some are just starting out while others are already ahead of the game and are investing in different types of property investments. 

If you are new to real estate investing, you might be overwhelmed and think that becoming a portfolio landlord or managing rental properties is the only way to do it. However, you can be a real estate investor without actually buying a property. Instead, you can invest your hard-earned money in real estate investment companies. 

What are they and how do these property investment firms work? 

In this article, Mortgage Introducer will shed light on everything you need to know about real estate investment companies in the United Kingdom. To give you a background, we will first introduce what these firms are and what they do. We will also list the types of real estate investment companies to help you decide on which type suits your investment goals. 

To our usual readers who are real estate agents and mortgage professionals, this article is part of our client education series. If you have clients who want to know the types of real estate investment companies to invest in, help them by sending this article! 

What is a real estate investment company? 

A real estate investment company is a business organisation that manages and invests in real estate properties. They can acquire real estate assets as well. This kind of business also specialises in the sale of residential, commercial, and other types of properties with the goal of generating profits. 

What does a real estate investment firm do? 

The main goal of a real estate investment company is to generate returns through numerous ways like rental income and appreciation in property values. These firms analyse market trends and assess property values. 

Real estate investment companies also engage in other activities. They can directly purchase properties, either for renovation or resale. They can also do this for rental purposes so that they will earn income from tenants. 

Other property investment companies focus on developing real estate. This involves two steps. First, they buy a piece of land. Second, they either construct new buildings or redevelop existing properties to increase their value. 

Aside from direct investing, many real estate investment companies manage funds for individual investors. They pool money from numerous investors to buy larger properties or portfolios of properties. 

This strategy allows individuals to invest in real estate without having to buy and manage properties themselves. Plus, this approach can provide access to opportunities that might be difficult for individual investors to pursue by themselves. Wealth diversification is possible if you invest in real estate investment companies while also managing your own property investments. 

Examples of real estate investment companies in the UK 

Here are some real estate investment companies in the UK: 

• UK Property Advisors Ltd 
• London Real Estate Advisors 
• Levy Real Estate 
• McDowalls 
• Anton Page 

Watch this video to find out why rich people invest in real estate: 

Has this stirred up your interest in property investing? Start your journey by reading this beginner’s guide to real estate investments. 

Types of real estate investment companies 

There are several types of real estate investment companies, each catering to different investment strategies and goals. Here are some of them: 

1. real estate development companies 
2. real estate investment and asset management companies 
3. real estate investment trusts (REITs) 
4. real estate operating companies (REOCs) 

Let us explore each of this real estate investment company below: 

1. Real estate development companies 

Real estate development firms vary from other real estate investment companies in the sense that developers let property investors buy existing properties while they are building them. Real estate development projects generally last for a longer period as opposed to acquisitions. As such, it is not unusual for this type of real estate investment company to work on a few projects over the course of ten years. 

Some of these firms partner with bigger organisations in order to benefit from the latter’s larger capital. They use this approach to generate income while building and selling properties. Other real estate development companies use their permanent capital funds to build properties and own them. Some practice both strategies.  

While some real estate development firms partner with larger capital providers to build and sell properties, others choose to build and own properties. And, of course, some real estate development firms do both. 

2. Real estate investment and asset management companies 

This type of real estate investment company is smaller in general. A real estate investment and asset management firm is more limited by a restriction on capital than bigger property investment firms. 

For instance, a real estate investment management company can have a hundred properties or more. On the contrary, real estate investment and asset management companies might be able to own and manage less than 20 properties. 

3. Real estate investment trusts (REITs) 

REITs are public real estate investment companies. They are listed on stock exchanges where traders and investors buy and sell REIT shares. In turn, REITs provide an option to invest in real estate without becoming a direct owner of properties. 

Usually, REITs need to distribute at least 90% of their profits to shareholders as dividends. Learn how REITs work when you watch this clip: 

Want to invest in a REIT? Here is a list of UK REITs to choose from. 

How many REITs are there in the UK?  

The London Stock Exchange has listed 48 UK REITs. These real estate investment companies have a combined market capitalisation of more than £40 billion. They are also classified by various niche markets such as: 

• accommodation 
• residential 
• commercial 
• industrial 
• specialty 
• retail 

4. Real estate operating companies (REOCs) 

REOCs are real estate investment companies that manage and own properties like REITs. They are also publicly traded. However, REOCs raise their equity and debt in stock exchanges instead of accumulating capital from private investors and traders. 

REOCs also differ from REITs in the sense that it is the same as investing in other firms—money flows from different sources. This can be through purchasing or developing a property (or both) and then putting it on sale. Another way for this type of real estate investment company to earn is by managing properties. 

Five categories of real estate properties 

In the UK, real estate investment companies focus on various categories of real estate: 

1. residential properties 
2. commercial properties 
3. vacant and agricultural lands 
4. industrial real estate 
5. lands for special purposes 

Let us briefly go over each category of real estate properties below: 

1. Residential properties 

Residential properties are those that function as primary residences of the owners. Examples of residential properties include single-family homes and apartment buildings. This type of property is targeted for renters and aspiring homeowners. 

2. Commercial properties 

These properties are those used for commercial purposes such as: 

• office buildings 
• medical centres 
• restaurant locations 
• retail spaces 

Mortgage Introducer has a dedicated page for commercial properties. Feel free to check it out! 

3. Vacant and agricultural lands 

Agricultural lands include undeveloped property used primarily for farming and livestock. Vacant and forest lands also belong in this category. 

4. Industrial real estate 

This involves any property that is used for storage and production like warehouses and heavy manufacturing spaces. 

5. Lands for special purposes 

These are properties created for other functions as opposed to the first four categories. Some examples are public parks, cemeteries, and educational facilities. 

Benefits of investing in a real estate investment company 

There are many benefits when you invest in property through a real estate investment company. Check out some of these perks: 

1. passive income 
2. tax benefits 
3. appreciation potential 

To better understand these benefits, let us discuss them a bit more: 

1. Passive income 

Investing in a real estate investment company will let you earn passive income without the responsibilities of direct property management. This can provide a steady cash flow while you enjoy the freedom to focus on other pursuits or lucrative ventures. 

2. Tax benefits 

Investments from real estate investment companies can also have tax advantages. You can enjoy some deductions for mortgage interest, property depreciation, and other expenses. These benefits can have a positive impact on your expected return on investment (ROI) since they minimise imposed taxes. 

3. Appreciation potential 

As years go by, properties are bound to appreciate their value due to market demand and other factors. Real estate investment companies aim to identify properties with strong appreciation potential. If you put your money in a property investment firm, you can earn profits from capital gains when they sell properties. 

Downsides of investing through real estate investment companies 

If you put your money in real estate investment companies, you should’ve already thought long and hard about the risks. Real estate investments often require a longer time to accumulate income. So, if you want quick gains, other investments might be more suitable. But if you want to invest in these companies, there are ways to mitigate its risks. 

For instance, diversifying your portfolio will reduce the risk of losing all your money. Try investing in stocks or bonds so that you have multiple streams of income. 

Consider your risk tolerance 

Before investing via real estate investment companies, you should consider your risk tolerance. As mentioned above, property investing is risky. Market fluctuations and property management issues within a real estate investment firm can affect your investments. If you can be comfortable and remain calm while facing these potential risks, you have higher chances of succeeding as a real estate investor. 

Should I put my money in real estate investment companies? 

Deciding whether to invest your money in real estate investment companies depends on several factors but there are two vital ones. First, consider your financial goals. If you are looking for long-term growth and passive income, real estate could be a good option. The second one is your financial capacity. A helpful tip when investing not just in real estate is to only use money that you can spare. 

Overall, you should do thorough research before investing in properties. Learn about the UK’s property investment market and the real estate investment company you’re considering. You can look into their track record and management team while analysing their gains with current market conditions. 

Earning extra income through having investments in real estate investment companies takes a lot of patience. However, it will all be worth it when you reap the financial rewards.  As the saying goes, good things come to those who wait. 

Would you try investing in any of these real estate investment companies? You can share your insights in the comments section below.