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FAQs

  • FAQs
  • Residential property investing

Residential property investing

  • How risky is residential property investment?

    Properties, like most other things, can go up or down in value. The value of your investment is very much dependent on the value of properties in the fund, so that can go up or down in value too. Property values, although provided by professional, independent Chartered Surveyors are a matter of opinion, so the price actually achieved when a property is sold could be higher or lower than its most recent valuation.

    Property can also take time to sell and, although the fund does usually hold enough cash to enable investors to withdraw their money, delays may occur if properties need to be sold. 

    You should always read the Key Investor Information Document or the prospectus before investing.

    UK residential property does have a long history of providing investment returns which are less volatile than the stock market or commercial property. It also tends to react differently to changes in the economic environment than other asset classes (in other words, its returns have little correlation with equities, fixed income and commercial property). If you already invest in those asset classes, an investment in the TM home investor fund can give your overall portfolio further diversification and potentially reduce the risk of your overall portfolio.

    There are also a number of ways which the fund reduces risk compared to direct property ownership:

    • It doesn’t take out mortgages on its properties, so the fund cannot end up in negative equity if property values fall. 
    • As a large investor, the fund can buy houses across a variety of locations and property types, and a large number of tenants, which spreads the risk compared to a small landlord holding one or two properties in a single area.
    • Hearthstone is also able to work closely with agents and developers to secure the best properties at the lowest cost to the fund.
    • Preference is given to new or modern properties which can reduce maintenance costs, and which attract reliable, long-term tenants.
  • What are the benefits of residential property compared to commercial property?

    Residential property investment is very different to commercial property investment and needs different expertise and experience in order to gain the best returns. 

    In general, residential property provides:

    • Diversification - low correlation to other mainstream asset classes, including commercial property.
    • Improved liquidity – whilst liquidity risk will exist for any property fund, it is generally easier to sell a house than a large commercial property as the residential market is larger and more active and with lower unit sizes.
    • Historically greater resilience of rental income during market downturns 
  • I own a property, why should I invest in this fund too?

    Most investors are underweight residential property – their own house is not part of their investible assets and is usually purchased because it suits their lifestyle, not because of the investment returns it might generate. 

     A professionally managed portfolio of private rented flats and houses can provide real diversification, alongside long-term capital growth or consistent income returns, within a portfolio of other assets such as equities, fixed income and commercial property. 

    As a large investor in residential property, the fund is also able to spread the risk of property ownership rather than it being concentrated in one or two properties in a single area. TM home investor fund invests in flats and houses of various sizes across England, Scotland and Wales to broadly reflect the UK (excluding Northern Ireland) housing market in terms of regional distribution and property type. Preference is for new or modern properties to keep maintenance and management costs as low as possible and which will attract reliable long-term tenants in strong performing rental locations with an active re-sale market to give the best potential returns. 

    The fund can also be used to meet specific requirements, such as an alternative to buy-to-let or to ensure money keeps pace with house price inflation for those saving for a house, to help their children/grandchildren on the housing ladder, or for expats currently living abroad.

  • What are the benefits compared to buy-to-let?

    Compared with traditional buy-to-let investing, the fund compares favourably for the following reasons:

    Lower risk: The fund offers greater diversification than buy-to-let, spreading the risk of property ownership across a large number of tenants, property types and locations, rather than it being concentrated in one or two properties in a single area.

    Buying power: As a large investor, the fund is also able to acquire assets through bulk-purchases from developers at discounts to open market value, providing additional return to investors.

    Value for money: The fund costs include all property management and maintenance as well as tenant liaison, making it hassle-free for investors, compared to a direct buy-to-let investment.

    Tax efficiency*: Unlike direct buy-to-let, the fund can be held in ISA, SIPP, Offshore Bonds and trusts. Outside of these tax-advantaged wrappers, capital gains are not subject to the 8% Capital Gains Tax Surcharge which apply to buy-to-let properties. Buy-to-let investors also have to sell an entire property – perhaps worth hundreds of thousands of pounds – in order to realise any capital gain, whereas an investor in the fund could choose to cash in just some of their shares to keep within annual Capital Gains Tax allowances each year.

    *Taxation information is based on Hearthstone’s understanding of legislation in force as at July 2018. Legislation may change, and tax and trust law may be open to differing interpretation. The impact of taxation will depend on individual circumstances. Potential investors should seek advice from their financial adviser or tax specialist before investing. 

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    Looking to retire?

    The TM home investor fund can provide returns which are less volatile than stock market investments, with the option to draw down capital as you need it.

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    Saving for your first house?

    TM home investor fund invests in real 'bricks and mortar' properties, so it can give your savings a chance of keeping pace with house prices.

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    Get your child on the property ladder

    Over the long term, cash based savings often don't keep up with house prices. That's where TM home investor fund is different because it actually invests in the UK housing market.

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    Diversify your investment portfolio

    Whether you're an existing or potential buy-to-let investor, TM home investor fund can help spread the risk of your investment portfolio.

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    Start growing your investment today!

    Now it’s simple to invest in residential property online in a tax-efficient ISA. Start today and make those savings goals a reality.

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