Savings rates are shocking at the moment and they’re likely to be for a few years to come as we face a low growth, low interest environment.
So if you’re looking to live off your investments, particularly if you’re retired, it’s tough to find products that could give you a regular, decent income from them.
Bond funds can give a better yield than savings accounts, particularly if you are willing to put your money into slightly riskier companies.
Also, stocks and shares that give good dividends are increasingly popular among income investors. Some companies regularly give shareholders a healthy dividend every six months and they are definitely worth considering for some of your money. Do keep in mind the risks, though, and it’s important to get some knowledge first of how dividends work and how to spot companies that are likely to continue to give you good returns.
- Alternative investments for income
- Care Home Investments
- Student Accommodation Investments
- Glasgow Airport Parking
- Know the risk
There are also more and more offers on the market of investments that could potentially give you a decent regular income, largely through investing in commercial property or space.
These products are offered by developers that are looking to borrow money from all sorts of people to fund their ventures, not just banks or building societies.
Increasingly, companies are going to individuals like you and me and offering pretty impressive returns on our money if we will invest in their projects for a few years.
Be aware, none of these investments are risk-free and you certainly shouldn’t put all your money into any of them.
However, as they offer pretty decent returns, they’re worth considering as part of your portfolio of income-bearing investments.
We’ve talked to One Touch Properties which has a number of developments largely in the Midlands and North which they are offering to personal investors. They cover properties in the care home, student accommodation and car parking areas.
The UK is facing a serious shortage of care facilities for the ageing population. Britain’s over-65’s now outnumber people under the age of 16 and there is a desperate need for more assisted living developments for the ageing population.
There is a particular scarcity of specialist care homes for dementia patients.
One Touch is offering individual apartments for dementia patients in a leasehold care home facility as investment opportunities.
With a minimum investment of £50,000 you would buy an apartment (25-32 sq m) that will provide care to elderly mentally infirm patients.
The care home is leased to a management company that pays an annual rent and that’s where your money would come from. According to Arran Kerkvliet, investment director of One Touch Property, you would get an assured 10-year income stream of 10% net after all management costs.
Another way to get a regular income is to buy a property in a university town and rent it out to students. This can give you a good income if you buy in the right place but it does involve some regular maintenance by you, as with any buy-to-let investment.
Or you could buy fully managed student property studios in cities like Leicester which have 39,000 students and a shortage of accommodation.
Again, on a sale and leaseback basis, a fully furnished student studio in Leicester, costing you £73,800 should bring in an average 8% net rental income assured for the first five years.
The way it works is that you pay in stages as it is built: the first stage payment is 30% of the value at exchange then a further payment within six months (25%) then balance on completion which will be in July 2016.
These units are managed by Student Lettings which have been managing student properties for a number of years in Sheffield, Leicester and other big university towns.
“A lot of people who weren’t landlords before have gone into the student accommodation market but don’t want to be hassled by running the property themselves,” says Kerkvliet, “This is an easy solution for them.”
In recent years, air traffic at Glasgow airport has increased by 7%. Nearly 500,000 passengers each month depart from the airport and nearly 60% choose to drive. There is growing demand now for parking spaces and Emirates long haul flights are being added, with Easyjet taking up additional short haul flights soon.
Cheaper fares with lower fuel prices are driving air traffic forward and, with it, the demand for long stay car parking. This means 300,000 potential tenants every month with only 4,500 long stay spaces.
For a minimum amount of £20,000, you can invest in in a leasehold car parking area that is fully managed by Airparks which has 15 years of experience in this field. The investment should bring an income steam of 8% net after management costs. According to Kerkvliet that income is assured for two years. After that, he says you should get 10% on a further six year lease, but that’s not definite.
Although all three areas covered above – elder care homes, student accommodation and airport parking – are sectors where there is increasing demand, and therefore potential increasing income, nothing is guaranteed 100%.
The initial incomes are assured by the management companies that lease the properties but it’s not guaranteed for life, like an annuity, and it’s still the sort of investment you should not enter into until you are really clear about the risks.
Read the small print before you sign!
These alternative investments are interesting and potentially lucrative, but they are relatively untested. Your income can depend on a number of factors that are out of your control such as:
- the management of the home or car parking space
- any competition that could spring up in the same geographical area
- unforeseen accidents or natural disasters
- possible criminal activity by companies separate from the developers
So these are the sort of investments you should put just part of your money into – don’t sink all your savings into them. If you do invest then watch them over the next five years to see how they do.
If you’re happy with their performance and, importantly, you understand how they work and what the potential downsides are, then feel free to add more later on.