Direct vs Indirect Real Estate Investing

Buying, selling, or flipping properties can yield extremely high dividends; that’s why smart investors choose real estate investment to gain healthy returns and regular passive income Frequently outperforming financial profits gained from other kinds of investment – such as high-interest savings or the stock market – makes residential property investment a lucrative option for astute investors.

With no barrier to entry, making money from property transactions is an appealing option to people in the UK from all backgrounds.  are several choices available to investors whether they are a beginner or a seasoned property buyer, including direct and indirect investments. Each one comes with its own risks and benefits.

What Is Direct Property Investment?

If you prefer to place your funds into tangible assets, direct property investment may be your preferred option. This is directly buying, controlling, and managing any real estate or property purchase. 

Decisions about whether to hold and rent the asset for monthly gains, or renovate and sell for high returns are down to the direct investor, who fully owns the property. leaves the investor with 100% of the profits for successful transactions, but can be cash flow dependent or may require mortgage financing. 

Purchase of a commercial or residential property that is then rented for a monthly profit is an example of direct real estate investment.

What Is Indirect Property Investment?

Indirect property investment uses collective funding (such as buying shares in a Real Estate Investment Trust, a bond, or other financing mechanisms) to gain interest in real estate. 

Using crowdfunded sources is one way that investors do this. Upfront investment is needed to get started with this method, but the indirect investment also means shared responsibility and profits. For those who want to invest but have limited time to manage the sale and purchase of properties, indirect investment can be a more passive way of making income from real estate.

An example of indirect real estate investment is purchasing shares in a property investment company that owns the assets and manages them on the investor’s behalf. 

Is direct or indirect investment better?

Depending on the individual investor’s situation, one investment option may be preferred over the other. However, it is important to understand the intricacies of each choice. 

Indirect investment may appeal as it is seemingly relatively low risk for newer investors due to the lower upfront cost, but there are often fees and costs associated with buying into a REIT or shared ownership fund. As with any investment, indirect real estate purchases still carry risk, with profits and payouts fluctuating or experiencing losses as well as gains. Investors may also be drawn in by the relatively passive approach to investing, but did you know that Redmayne Smith can provide an end-to-end experience when you purchase property through us? Through our network of trusted property industry providers, we can recommend everything from property management companies to legal representatives. Using us means that you can directly invest AND have a hands-free experience.

As a direct investor, costs such as building and renovation or utilities will need to be managed before any profits are realised. But the potential gains combined with tax offsets can often mean that financial benefits are much higher. These offsets are not possible with indirect investments. Additionally, purchasing Off-Plan or new build developments though us means that you won’t actually have any building or renovation costs as you will have a sparkly new unit with a New Build Guarantee!

Control that is afforded by direct investment is another key advantage: investors can decide when to sell, hold, or rent, without choices being restricted by fund managers, rules, or other investors. This allows complete flexibility over sales, purchases, and – ultimately – cash flow. 

How To Get Into Property Investment

Investing in a property portfolio and building wealth from real estate is a solid financial option. For those starting out, having a dependable investment company that can offer advice and support will help you travel the road to financial freedom. 

A competitive advantage is gained from working with experienced investors, who understand local markets and having the ability to invest early in new developments, allowing profits to be maximised. 

Redmayne Smith has a collective wealth of investment expertise and manages real estate investments in local UK markets (and all over the world) with a multi-million-pound portfolio. Book a call with one of our specialists today to start your investment journey or join our next webinar to learn more about the investment opportunities available to you. Our trusted advisors deliver the best opportunities and will guide you on your journey to real estate wealth.