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UK Company Offers Shares of Real Estate
Real estate news By Beth Anderson
Tuesday, September 11, 2007
Diversifying into the residential real estate market has been simplified by the creation of The Property Investment Market (TPIM). TPIM allows investors in the U.K. to buy shares of rental property in the same way that U.S. investors buy shares of businesses in the stock market. This approach is a direct answer to stock traders who preach that real estate is illiquid and has a high cost of entry. TPIM investors can buy shares of rental property in the U.K. for as little as ?1, with average annual returns of 11.32 percent on mortgage-free property and 23.25 percent on mortgaged property, according to the Association of Residential Letting Agents’ Review and Index for Residential Investment Q2 2007.
Becoming a TPIM member is free; money only has to be deposited into the online accounts if the investor is planning to buy shares of a property soon. The rental properties are managed by professional property managers on behalf of the investors. Shareholders receive a portion of the rental income quarterly, similar to stock dividends, and may choose to sell their shares at any time. TPIM charges a 1 percent fee for all transactions. For a building to enter the TPIM market, investors can preorder shares in a new property and the offer remains open until the money is raised or the time limit exceeded. When enough money is raised, TPIM buys the property and investors can begin selling and buying shares. If enough money isn’t raised, the deal falls through and investors get the money from their preordered shares back.
By fractionalizing the rental real estate market in this way, TPIM has opened up the bullish U.K. housing market to a much larger audience. Instead of paying the average cost of ?354,529 for a home in London, according to the BBC, individuals can invest as much or as little as they want using TPIM’s fractionalized market. Average citizens can now profit from the 4.9 to 8.5 percent yearly appreciation that wealthy real estate investors have been enjoying (appreciation amounts are from London and Northern Ireland, respectively, according to the BBC). For instance, according to a statement from TPIM, a rental property in Horden was recently valued at ?60,000. The building was originally purchased at ?45,000 in November 2006 with plans to refurbish when the original tenant moved out. The unit is about to be refurbished and has seen a 33 percent increase in value.
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