Company Investments

It goes without saying that property has been an extremely popular investment option over the last few years.

Property is an attractive investment because it offers the dual opportunity for investment returns via the prospects for a high increasing income and capital appreciation.  Caution should, however, be adopted in that property is illiquid and unlike other investments, cannot generally be partially encashed.  Rental yields and capital gains will be liable to Corporation Tax.

A company may buy property, both residential or commercial, directly with available cash or, after putting down a minimum deposit of 15% to 25%, may fund the remainder with a buy to let mortgage or commercial loan.  Purchasing property in this manner avoids committing most of the company’s available resources to the purchase, thereby retaining a degree of liquidity within the company.

The investment risk may be diluted somewhat by avoiding the direct ownership of property and instead gaining exposure via a collective investment such as a Unit or Investment Trust. These invest into property, although in this instance it is likely to be orientated towards commercial property. Property fund managers will construct a portfolio of commercial properties, including, for example, offices, retail parks and warehousing.

Structured as a collective or ‘pooled’ investment, these funds generally avoid the common downside of direct property investment of illiquidity by investing partially in property shares and/or cash, although this is usually only a small proportion of the fund.

Because of the opportunity to achieve positive investment returns via both rental income and capital appreciation, property could be considered a less volatile investment than equities, although not without risk.