Thanks for the reply Michael. I think you’re right, there aren’t a lot of REITs I can think of that are residential focussed! That said I have put some of my pension into a student property fund. I suppose that’s half way there :)

I might be overthinking the company conversion. Something in the back of my mind was telling me if I wanted to go back to contracting I couldn’t necessarily run my co. both ways (IT consulting & investing) – it would be worse off tax wise – but I will be sure to check up.

Best of luck with FIRE – I’ll be following your progress!

Thanks, Andrew. I see REITs as not being directly comparable to Property Partner, which is kind of frustrating as they’re a great vehicle to invest passively. The main difference is that REITs invest mainly in commercial properties, not residential which has more stock-like characteristics. I love the ISA part, though.

So on one end of the spectrum, you have the traditional Buy to Let investors who like to take a concentrated risk (large capital, single location) which may or may not pay off. With traditional BTL you have full control over the properties, the process, tenants etc but they’re not passive at all. One needs to do sourcing, management and take care of maintenance (even when using an agency). They’re also not easy to diversify across multiple locations unless you start with very large capital.

Then REITs are at the other end of the spectrum where a fund manager will do the research and allocate your capital. Usually, that’s commercial properties, unlike BTL. I find Property Partner to sit somewhere in the middle. Although I get no full control over the tenants, I get to pick residential properties and diversify accordingly. Fractional ownership, liquidity and passiveness are the main reasons I invest this way. I quite like this model and I believe it will grow more and more in the future thanks to the diversification benefits.

By the way, have you heard of any REITs targeting residential accommodation rather than commercial? Sort of like Property partner but in a stock exchange that can go into an ISA. Also, not sure what the costs would be to convert your dormant company to an investment one, I wouldn’t imagine it being a high-cost move!

I also have my own Ltd. for IT consulting, which is running a bit dormant now as I’ve gone back to full time employment. Wasn’t sure whether to close it, and take advantage of entrepreneurs relief (ER), or use the warchest reserves to start investing in PP or similar instead. Are there not additional costs for converting to a de-facto investment co. as well as loss of ER? Decisions decisions.

Thank you for your kind words, Amit. You’re right, tax-gain harvesting is applicable to individuals in order to “harvest” their annual allowance. Companies do not have a capital gains allowance but they can offset their costs (plus other losses) against the gains which also helps a lot!

Great article!! Everything you have written here is GOLD.

Quick question though:
Am I correct in saying that the “Tax-gain harvesting” strategy you suggest only works if you invest as an individual and not as a LTD company?

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Many thanks,
Amit

A good question, Elliot. Development loans are usually secured over the development. However, Property partner investors have second-charged security, with the first charge being held by the lending partner (i.e. Proseed). Sometimes, the developer also gives a personal guarantee over some value of the loan. Have a look at the “Loan Security” section of the Salcombe loan for example.