But one asset manager has launched a website offering investors a way to make gains from the buy-to-let market without owning a property and thus avoiding the recently increased stamp duty levies and dwindling tax reliefs.
McCafferty Asset Management, which oversees £1.36bn of European property assets on behalf of private and institutional investors, has launched PROSPI. The online investment platform allows investors with as little as £500 to take a stake, along with other investors, in fully tenanted residential properties managed by McCafferty's management team.
The catch is that there is currently no secondary market if you wanted to withdraw your investment before the projected five-year period, but it is possible to transfer your investment to another investor if one can be found.
As well as earning a percentage of the rental income, investors will also receive any capital growth when the asset is sold, typically after five years. After all fees and charges, total returns from rental income and capital growth are forecast to average around 15.6 per cent over the five-year term. Each property will be contained within a special purpose vehicle which will retain McCafferty as real estate manager. Dividends will be paid to investors on a quarterly basis.
Unlike other schemes, which invite investors to participate in properties before they have been identified or tenanted, McCafferty has access to an established portfolio of fully-tenanted residential properties owned by the Pervaiz Naviede Family Trust, which has a portfolio of more than £200m assets mainly in the UK and United Arab Emirates. This means there is a much shorter time lag between investing and receiving a return. The properties offered are mortgage-free, and investors avoid all the legal responsibilities of being a private landlord.
There are no upfront charges, but McCafferty will receive an annual fee of 12.6 per cent (including VAT) of gross annual rental income for managing the property plus letting fees (normally one month's rent), and will also take a 15 per cent share of any capital appreciation, but only on the sale of the property.
