Indirect Property Investment Flashcards
What is a special purpose vehicle (spv)
A limited partnership set up to finance specific projects
How is an spv structured
Allows investments to be made from self invested pensions, small schemes and charities
Highly geared up to 90% of the cost
What are the returns of an spv
Rental income is used to service the debt so investment only offers capital growth
Investment period is 3 to 7 yrs
Can an investor own shares in a listed property company and why?
Yes they can and if they want to acces the property market indirectly
The shares have to be on a listed stock exchange
What are the differences from owning listed shares in a property company and holding property directly
They are more liquid
More diversification
Share price is affected by
Quality of management
Level of borrowing
Underlying value of the fund
What is a reits
This is a tax transparent investment vehicle that allows the person to invest in commercial and residential property by buying shares in reits
What does reits have to be for it to qualify as such
Have to be uk tax res
A close company
Listed on recognised stock exchange including aim
90% of the rental profits from each accounting period must be paid as divs to the investor withering 12 months of the end of the accounting period
How are reits taxed
Will be free of cop tax given at least 75% of the company total gross profits have to come from letting and the interest on borrowing is 125% at least covered by the rental profits
How are reits distributed
Payment from the tax emperor part which is paid net of 20% (isa holders get it gross )
Non tax payers can claim it back
And
A dividend payment from the non exempt element
Are reits subject to cgt
Yes they are in the normal way
How is an insurance company property fund related to properties
They have funds that hold property directly
What are the distinguishing features on an insurance company property fund
Values of units are directly linked to the underlying properties in the fund
Funds are not geared
Liquidity is higher than direct holdings
