What is a Property ISA?
A property ISA is not a type of ISA as different types of ISA wrapper can be used to house property or property-backed investments. Property ISAs can be a means for those who wish to access the rewards that come with property investing without the need to invest directly into a single property.
A number of Innovative Finance ISA providers allow UK individuals to invest in property transactions. This means an investor can access potential returns from the UK property market in a tax-free way. See below for a list of the current crop of innovative finance ISAs which invest in property development or property loans.
Property within an Innovative Finance ISA
The Innovative Finance ISA allows investors to invest in property-backed peer-to-peer loans, including residential buy-to-let mortgages, bridging loans and property development loans. The peer-to-peer lending platform may offer to automatically deploy your investment funds across a variety of property-backed loans, or it may alternatively allow you to select individual property transactions that you would like to provide funding towards.
Property within a Stocks & Shares ISA
The ISA’s tax-free credentials are again valuable in the case of Stocks & Shares ISA investors, who are able to receive dividends and capital gains tax-free.
Property-focused investments which can be placed inside the Stocks & Shares ISA include investment trusts (including Real Estate Investment Trusts, or REITS), property bonds and a range of structured products.
Are Property ISAs worth investing in?
Despite the risks inherent to collective property investing and peer-to-peer lending, there are a number of reasons why an investor might wish to consider in a Property ISA – particularly given the experience that many direct property investors are currently having in the Buy-to-Let market.
The tax-efficient nature of ISA investing is, of course, a major draw for many and the ability to invest in property-backed products whilst enjoying tax-free returns will be very attractive to a great many investors. ISA investing is, in relative terms, considerably more accessible in so far as one is not required to raise sufficient funds to buy a property outright in order to get involved in property investing under the ISA route. There are a range of property ISA accounts available and investors can get started from as little as £250.