Investing in property can be a great idea if you want to receive an income from renting − and you may also stand to make money through capital growth when you come to sell the building.
But you don't have to own property directly to earn money from it. You can also hold commercial property through investment funds as part of a balanced portfolio.
That's exactly what M&G can offer you − the opportunity to benefit from a type of investment that offers many of the best features of both equities and bonds, and lets you invest in the property market without the worries of being a buy-to-let landlord, or finding enough money to buy huge commercial properties like warehouses, shopping centres or industrial estates. Unfortunately we have had to temporarily suspend dealing in the M&G Property Portfolio. Read more >
However, it's important to remember that value and income from a fund's assets will go down as well as up. This will cause the value of your investment to fall as well as rise and you may get back less than you originally invested. We do recommend that you have a chat with a financial adviser if you have any doubts about investing in this specialised sector.
Buying property doesn't just mean purchasing the 'bricks and mortar' of a building. You're also buying an interest in the land that the building sits on, which is a key factor in the long-term value of property as an investment.
Additionally, when it comes to investing in the property market, there are some clear differences between residential and commercial property to think about.
Residential property includes:
When you invest in a residential property, you'll receive an income from your tenants in the form of rent payments, and you'll also have the possibility of turning a profit when you eventually sell. However, leases on residential properties are often very short – usually only six months or a year – so your rental income can swing up and down, with times when your property is standing empty while you're looking for new tenants. All this means that income from residential properties can be unreliable.
Commercial property includes:
Compared to residential property, commercial property can offer a much more stable form of income. Leases are usually longer – often up to five or ten years – and corporate tenants are less likely to default on rent payments. They'll also give you a longer notice period when they do decide to move on.
If you make the decision to invest in property, there are several options available to you:
Traditionally, it's often been difficult for private investors to take advantage of the benefits of commercial property – often because of the large sums of money involved, and because big commercial properties can be difficult to sell quickly. Now, however, it's much easier to invest in property through funds like M&G's.
Investing in commercial property is a great way to diversify your portfolio, because in the long term it doesn't react to changing economic conditions in the same ways as other asset classes.
As we mentioned above, commercial property is a specialised sector, so we do suggest talking to a financial adviser if you have any doubts or questions about investing. It's also worth remembering that the value of investments, and the income from them, do go up and down, so how much your investments are worth will fluctuate over time, and you may not get back the original amount you invested. While the value of property assets may increase in the long term, there's no actual guarantee that they'll do so.
As M&G's property investment arm, M&G Real Estate is now one of the world's largest property investors, managing over £28.5 billion* of assets across all the major sectors in the UK, Europe and Asia.
Whenever we're making decisions about where to invest, we've got many years of experience to fall back on – and we're backed by one of the most respected research teams in the whole real estate fund management industry.
This means that our expert fund managers have the best insights in the business to rely on, and our wide network of contacts allows us to spot opportunities quickly, giving you access to one of the widest ranges of investment options in property today.
*As at 30 June 2020.