Alternative property investments are an excellent way to diversify your portfolio. Whether you’re already an established investor or a first-time buyer, an alternative property investment can provide you with a more stable investment opportunity and one that is not so vulnerable to market turns.
In times of market uncertainty (e.g. important global elections, which can often have an unpredictable effect on world markets and therefore property prices), alternative investments can offer a great way to continue investing, but in more stable areas.
Traditional property vs alternative property investment
An example of a traditional investment is a buy-to-let property with a focus on long term tenants. This kind of investment offers investors a return on rental, as well as on the final sale of the property in the future. While this sort of investment can be beneficial, there are also disadvantages. What if an area suddenly becomes less desirable? Prices can fluctuate and unemployment trends can negatively impact buy-to-let investors. For this reason, many investors consider opting for alternative property investments.
Alternative property investments include student accommodation, hospitals, medical centres, retirement centres, car parks, hotels, clubs, and gas stations. These are sectors for which the demand remains constant, so although investors may see some income variation throughout the year, yearly cash flows remain consistent. By diversifying your investment portfolio, it is possible to increase the probability of your returns all year round, whatever may be happening politically or in the global markets, it is unlikely that all sectors will slump at once.
One of the most popular choices of alternative property investment, especially for overseas investors, is student housing. According to a recent article in the Financial Times, the student accommodation sector has “ballooned from a fringe investment ten years ago to being a global market worth $200bn today”. There will always remain a steady demand for purpose-built student housing, so long as there is a demand for education. And, in many emerging markets, that demand is on the rise, as higher education becomes more accessible.
If you are thinking of investing in student accommodation-friendly property, it’s best to begin by identifying key areas that are home to leading universities with a large demand from overseas students. These students are the most likely to be searching for a temporary home. Also, check the proximity of the campuses, making sure properties are within easy reach. Of course, there are pros and cons associated with this form of buy-to-let situation. Most students will have a parent as their rent-guarantor. Therefore, your risk of missing out on rent in cases of missed payments is reduced. In addition, students are likely to pay the majority of the rent up front upon request. On the downside, be aware that for many students, this is their first time living away from home, so it is important to have a reliable and high-quality maintenance team and property manager on-hand, to help keep an eye on things.
A further type of alternative property investment, again popular among overseas investors, includes retirement and medical centres. Forbes recently published an article called “How To Make Money From The Global Aging Megatrend”. According to this article, “life expectancies have risen from a global average of 49 in 1955 to 72 in 2016”. It is estimated that the world’s population of over 65s will double by 2040. The article goes on to mention that by 2020, the spending power of seniors will reach $15 trillion on a global scale, marking an increase of 7 billion in just one decade. Given these figures showing an ever ageing population and an increased demand for high-quality retirement and medical centers, residential homes for the elderly seem like a sage investment. For those considering this kind of property investment, it’s important to begin by looking at popular areas for retirement, such as coastal regions or the suburbs of major cities.
A final type of alternative property investment is car parks. For this type of investment, minimal construction is required, and one can begin by acquiring a land plot in a desirable area, where the demand for safe and convenient car parking is high. In a time of increased car usage, in particular, in emerging economies (where the number of cars is expected to increase by 1.9 billion between 2005 and 2050, according to OUP of Journal Economic Policy), car-parks could prove to be a highly profitable investment.