Five investment options beating buy-to-let returns

The latest research by peer to peer finance platform, Sourced Capital, has looked at the best alternative investments to make for those currently wary about entering the buy-to-let market due to the current pandemic.

Changes to stamp duty and tax relief have already caused many landlords to reconsider their buy-to-let investments and with the current pandemic causing the government to halt evictions while offering landlords a mortgage holiday to compensate for tenants who can’t pay their rent, investment into the sector is predicted to decline even further.

At present, the average UK property provides a rental yield return of just 5%, 4.2% when investing in bricks and mortar in the capital.

Bonds, ISAs and savings accounts may provide a more hands off return but these returns sit between just 0.4% and 1.2% a year on average.

So what else can you invest in while uncertainty remains?

Since 2005, investing in jewellery has proved a better option than buy-to-let, with an average annual return of 6.7%.

Vintage watches, in particular, have held their value with returns of 8.4% per annum.

For those that wish to remain in bricks and mortar without the complications of a hands on investment, peer to peer platforms such as Sourced provide the option to invest in an Innovative Finance ISA and enjoy the returns of a largely consistent property market without the management required of a buy-to-let property.

The IFISA is a category of ISA which was launched in April 2016 for UK taxpayers and can provide returns as high as 10-12% an annum, although capital is of course, at risk. Previously, there have been two main types of ISA: Cash ISAs and Stocks and Shares ISAs.

Similar to a Cash or Stocks and shares ISA, an IFISA allows you to invest money without paying personal income tax. This enables you to invest your money into the growing peer to peer market.

Like cash ISAs Each tax year, you get an allowance of up to £20,000 to put into IFISAs which you can distribute across your different ISAs should you wish to. In addition, you can transfer your previous year’s ISA investments into your IFISA.

However, in current lockdown conditions, you may want to opt for an investment into fine wine or classic cars. If you can avoid the temptation to drink it, fine wine has seen an average annual return of 13.2% since 2005, while classic cars top the list with a return of 16.4%.

Category
Information
Average annual % return value
Classic cars
Annual average since 2005
16.4%
Fine wine
Annual average since 2005
13.2%
Sourced Capital – property investment
Alternative peer to peer investment platform – property development
10.0%
Vintage watches
Annual average since 2005
8.4%
Jewellery
Annual average since 2005
6.7%
Buy to Let rental yield (UK average)
Average house price (Feb 2020) = £230,332 and average private rent (March 2020) = £959
5.0%
Buy to Let rental yield (London average)
Average house price (Feb 2020) = £476,972 and average private rent (March 2020) = £1673
4.2%
Fixed rate ISA (1 year)
Average rate for 2020 – fixed rate ISA for a set term
1.2%
Fixed rate Bond (2 year)
Average rate for 2020 – fixed rate bond for a set term
1.1%
Fixed rate Bond (1 year)
Average rate for 2020 – fixed rate bond for a set term
1.0%
Variable rate Cash ISA
Average rate for 2020 – cash ISAs that are easy access and pay variable rates of interest. In other words, you can get your money when you want but the interest rate can go up or down
0.6%
Instant access savings
Average rate for 2020 – normal instant access savings account
0.4%
Sources
Average house price
Rent
Savings statistics
Other investments
Bonds

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