Why bother with buy-to-let when you could own this great property share?

This property firm offers a discount to net assets and a chunky yield, as well as diversification and active portfolio management.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

I last bought an investment property back in early 1997. The market was clearly down at the time and the fact that my property was selling at a low price compared to its price history was face-slappingly obvious.

It was a big commitment. I had to invest a sizeable deposit and then finance the rest of the purchase price with a commercial mortgage. After that, I had to run the whole operation and make sure that the rent kept flowing in to cover the mortgage repayments. It is not, I would suggest, anything like passive investing. If you go into hands-on property ownership as a means to invest, such as in a buy-to-let situation, you will earn every penny of the returns you manage to squeeze out of the enterprise.

A murky macro-picture

But, to me, it is not an obvious time to invest in property right now. The property market is not bouncing along a gently undulating bottom like it seemed to be in 1997. I certainly wouldn’t risk so much on one big property investment now because the macroeconomic picture is less clear than it seemed to be in 1997. I see the property prices as likely to fall as they are to rise. And if they fall, it will likely manifest as a big drag on your overall returns from a buy-to-let investment over the next few years.

Should you invest £1,000 in Schroder European Real Estate Investment Trust Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Schroder European Real Estate Investment Trust Plc made the list?

See the 6 stocks

I’d be much more inclined to invest in some of the property companies listed on the London stock exchange in order to gain exposure to the property market today. A good example is Schroder European Real Estate Investment Trust (LSE: SERE), which is a United Kingdom-based company investing in European property, such as in Paris, Berlin, Stuttgart and Hamburg.

Today’s full-year results report revealed the firm acquired five properties in “high-growth” sectors and cities in the period, spending €52m to achieve an average net income yield of 8%. It also disposed of two retail properties raising €44.8m, which were delivering an average net income yield of 5%. I think that’s a great example of how the diversity of properties in the firm’s portfolio enables the fund managers to trade properties in the pursuit of higher returns, which is something that’s hard to do if you’ve invested in a single buy-to-let property. The market is illiquid when you own property directly yourself, and your trading costs will be prohibitively high compared to your relatively small investment. On top of that, there’s the sheer hassle of buying and selling property.

Diversification, liquidity and flexibility

However, by owning shares in a company like SERE instead, you gain all the advantages of diversification, liquidity and flexibility that the larger underlying business provides. Sir Julian Berney, the chairman of the board, said in the report that the firm had seen another strong year” with growth in both net asset value (NAV) and income, “chiefly underpinned by the profitable disposal of lower yielding assets alongside new investment into higher growth industrial assets.”

With the share price close to 112p, the dividend yield runs near 5.9% and the price to tangible book value is around 0.82, suggesting decent value. I think the shares are attractive.

We think earning passive income has never been easier

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Smartly dressed middle-aged black gentleman working at his desk
Investing Articles

2 rock-solid growth shares to consider as economic storm clouds gather!

These cheap growth shares could be great safe havens in the current economic and geopolitical climate. Here's why.

Read more »

Stack of British pound coins falling on list of share prices
Investing Articles

Here’s why the IAG share price fell 26% in March

The International Consolidated Airlines (IAG) share price was soaring up to the end of February. But the party seems to…

Read more »

Investing Articles

As the stock market wobbles, here are 2 shares I’ve got my eye on

These two companies are at very different stages in their development, but each looks interesting to me after the recent…

Read more »

Investing Articles

Is buying gold stocks the best way to capitalise on bullion’s bull run?

Forget about gold bars, coins, and funds for a moment. Here's why considering gold stocks could be the best option…

Read more »

Investing Articles

These 3 dividend shares may be better buys than FTSE 100 income stocks!

Looking for great dividend stocks to buy in April? Scouring the FTSE 100 is not the only option when it…

Read more »

Investing For Beginners

Want to invest in an ISA but scared of a stock market crash? Consider this

A stock market crash or dip can be a great time to buy FTSE 100 stocks at reduced prices. Harvey…

Read more »

The Milky Way at night, over Porthgwarra beach in Cornwall
Investing Articles

Up 300% in 5 years! Is this overlooked FTSE star the best share to buy in an ISA today?

Harvey Jones is stunned by the stellar growth of this FTSE 100 company and wonders if it's now the best…

Read more »

Investing Articles

5 days to the ISA deadline, this cash machine is my standout FTSE 100 stock

Up 115% in just a year, Andrew Mackie believes this FTSE 100 stock’s most explosive moves are still very much…

Read more »