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How to invest in property through your ISA

Moneymagpie Team 18th Aug 2023 No Comments

Reading Time: 3 minutes

This is a paid article on behalf of easyMoney

New insight from peer-to-peer real estate investment platform easyMoney examines why investing your ISA allowance in property is the best way to secure solid returns – even during times of economic uncertainty.

An ISA allowance is the amount of money one is allowed to invest in an ISA account without having to pay tax on the returns. In the 2023/2024 tax year, the ISA allowance is £20,000.

This allowance can be used with a traditional cash ISA, for which the average return is currently 0.51%. But there are also alternative avenues of utilising your ISA allowance that deliver much higher rates of interest, one of which is property.

The benefits of using ISA allowance for property

  • Stable long-term investment

The UK property market is a stable long-term investment. Over time, property values rarely fall dramatically, and on the occasions where they do dip, it’s never too long before they recover. This means your investment is in relatively safe hands when it’s sitting in bricks and mortar.

  • Tax free returns 

Most methods of property investment, such as buy-to-let or equity growth investments, require you to pay tax on your returns, but using the ISA means you do not, providing you stay within your ISA allowance. 

  • Affordable entry points

Buying property outright can be a great investment, but it requires a large amount of money to be paid upfront in the form of a deposit. ISAs, on the other hand, are much more affordable, and the investment journey can begin with very accessible sums. 

How do I use my ISA allowance to invest in property?

An Innovative Finance ISA (IFISA) is the best way to use your ISA allowance to invest in property and enables you to invest in peer-to-peer crowdfunding. 

Crowdfunding matches people who are looking for money to build property, with people who want to invest in property development. 

Starting with as little as a few hundred quid, you can lend a proportion of what the developer needs and the rest will come from other IFISA investors. When you come to cash in, you receive returns on the money you invested.

IFISA benefits and considerations

Innovative Finance ISAs often have low minimum-investment requirements. They’re easy to set up and access, usually via online platforms, and the returns can be very handsome indeed. 

In the case of easyMoney, you’re looking at a current target rate of 7.26% when investing over £100,000, far above the return you can expect from a cash ISA, and even more than a stocks and shares ISA. 

However, this high rate of return is because IFISAs are considered to be higher risk than a traditional ISA, meaning the chances of losing money are higher. But, no kind of investment guarantees positive returns and, as already mentioned, the risk is largely mitigated by the UK’s strong, reliable property market.

Utilising the right platform and providing the right guidance and advice is also key. easyMoney is the proof in the pudding in this respect, with £167m in investor funds currently deployed, £295m in total loans written to date and a 100% record with no borrower defaults. As a result, no easyMoney investor has ever made a loss.

Expected IFISA returns

How does the easyMoney IFISA target rate of 7.26% compare to other forms of property investment? 

Well, the average rate of annual growth for residential property currently sits at 3.5%; Real Estate Investment Trusts (REITs) deliver an average of 4.4%; the average buy-to-let yield is 5.1% for residential and 5.8% for commercial; and traditional property bonds deliver an average of 6%. 

IFISAs are clearly ahead of the pack. 

Jason Ferrando, the CEO of easyMoney, said:

“Property prices in the UK are incredibly resilient and reliable, despite the fear-inducing tone that some media outlets often use to gain readers and viewers. 

“Even during periods of economic hardship, property values are hard to keep down for long and this means that long-term property investments are likely to deliver great returns. But the usual problem is the high initial cost of investing in property, such as buying a home or a buy-to-let. IFISAs like ours remove this barrier to entry and open up the great returns of property investment to everyone from professional investors to everyday people who just want to make some of their savings work for them, whether it’s £500 or £5,000.”



    Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.

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    Jasmine Birtles

    Your money-making expert. Financial journalist, TV and radio personality.

    Jasmine Birtles

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