Property investment can take many different forms.
For some investors, that means buying a property and becoming a landlord. For others, it could mean investing in Specialist Supported Housing or lending money through a loan note.
A Property Share Scheme offers another way to gain exposure to UK property. Instead of buying an individual property yourself, you invest through a share-based structure connected to a portfolio of UK property.
But what does that actually mean?
In this guide, we explain the Property Share Scheme in simple terms and look at how it differs from some of the other property investment options available to investors.
What is a Property Share Scheme?
A Property Share Scheme allows investors to invest in a property-backed investment by purchasing shares, rather than buying a property directly.
Instead of an investor buying one flat or house in their own name, their investment is part of a wider structure connected to a portfolio of UK property.
Put simply:
Buy-to-let means buying a property. A Property Share Scheme means investing through shares connected to a existing property portfolio.
This is one of the most important differences to understand.
How does the Property Share Scheme work?
The Property Share Scheme gives investors access to the UK property market through shares.
Investors purchase shares in the investment structure, which has interests connected to a portfolio of UK property.
This means the investor does not become the landlord of an individual apartment or house.
There is no need for the investor to find a tenant, arrange repairs or manage an individual property.
The Property Share Scheme has a fixed four-year investment term, with contracted return terms set out in the investment documentation.
As with any investment, investors should understand the structure, risks and terms before investing.
Do I own a property with a Property Share Scheme?
No. This is an important distinction.
When you buy a buy-to-let property, you directly own that property.
With a Property Share Scheme, you are investing through shares in an investment structure connected to property. You do not personally own a particular apartment or house.
This can make the investment simpler to manage, but it also means it is not the same as owning a physical property yourself.
Property Share Scheme vs Buy-to-Let
Buy-to-let is one of the best-known forms of property investment.
The basic idea is simple: an investor buys a property, usually with the intention of renting it to tenants and generating rental income.
The investor owns the property and is responsible for the investment.
This can provide investors with direct ownership of a physical asset, but it also comes with responsibilities.
There may be a mortgage, legal costs, maintenance, insurance, tenant management, periods without a tenant and other ongoing expenses.
A Property Share Scheme works differently.
| Property Share Scheme | Buy-to-Let | |
|---|---|---|
| What do you invest in? | Shares connected to a property portfolio | An individual property |
| Do you own a specific property? | No | Yes |
| Do you manage tenants? | No | Yes, directly or through a managing agent |
| Do you arrange property maintenance? | No | Yes, directly or through a managing agent |
| Mortgage required by investor? | No individual property mortgage | Often used, although not essential |
| Investment term | Fixed four-year term | Usually determined by the investor |
| Potential return | Set out in the investment terms | Rental income and potential capital growth |
| Property exposure | Through a wider investment structure | Direct ownership of individual properties |
Neither approach is automatically right for everyone.
Buy-to-let may appeal to someone who wants direct ownership and control of a property. A Property Share Scheme may appeal to someone who wants exposure to property without becoming a direct landlord.
Property Share Scheme vs Specialist Supported Housing
Specialist Supported Housing is another form of property investment, but it serves a very different purpose.
With Specialist Supported Housing, an investor generally purchases a property that is specifically used to provide accommodation for people who require additional support.
These investments can involve long-term leases, specialist operators and rental arrangements linked to the supported housing sector.
The investment is therefore closely connected to the operation of a specialist housing model.
A Property Share Scheme is different.
It is not an individual Specialist Supported Housing property investment. Instead, investors purchase shares through an investment structure connected to a wider portfolio of UK property.
The two approaches can therefore appeal to different types of investor.
For example, someone looking for a specific property with a long-term supported housing lease may consider Specialist Supported Housing.
Someone looking for a share-based investment providing exposure to a wider property structure may consider a Property Share Scheme.
Property Share Scheme vs Loan Notes
Loan notes can sometimes be described as a property investment, but they work in a fundamentally different way.
With a loan note, an investor is essentially lending money to a company.
In return, the company agrees to pay the investor a specified return, usually according to the terms of the loan note.
The investor is therefore a lender rather than a shareholder.
A Property Share Scheme works differently.
With a Property Share Scheme, investors purchase shares in an investment structure connected to property.
The difference can be explained very simply:
A loan note = you lend money to a company.
A Property Share Scheme = you invest through shares connected to a property portfolio.
The legal rights, structure and risks are different, which is why investors should look carefully at the underlying investment rather than simply comparing headline returns.
Why does the difference between shares and loan notes matter?
It is easy to look at two investments offering a similar return and assume they are essentially the same.
They are not.
The way an investment is structured can affect how it works, what rights the investor has and where their investment sits within the overall structure.
A loan note represents a debt owed by a company to the investor.
Shares represent an investment in a company.
This is why understanding what you actually own or are lending is just as important as looking at the potential return.
Is a Property Share Scheme the same as buying property shares?
Not necessarily.
A Property Share Scheme is a specific investment structure designed to give investors exposure to property through shares.
The investor is not simply buying shares in a publicly traded property company.
Instead, the scheme is structured specifically around investment in UK property and gives investors access to property through a share-based investment.
This provides a different route into property investment from simply buying an individual property.
What are the potential benefits of a Property Share Scheme?
One of the main differences is simplicity.
An investor does not need to deal with an individual property, tenants or property maintenance.
The investment also has a defined four-year term, meaning investors know from the outset that the investment is structured around a specific period.
Another important difference is that the investment is connected to a wider property portfolio rather than being centred on one individual apartment or house.
However, investors should not assume that a wider portfolio removes investment risk. The value and performance of an investment can be affected by a range of factors, and investors should consider the full investment documentation before making a decision.
Understanding the Different Ways to Invest in Property
There are several ways to invest in the UK property market, and each works differently.
Buy-to-let: You buy and own a property directly.
Specialist Supported Housing: You invest in a property used within a specialist supported housing model, often with longer-term leasing arrangements.
Loan note: You lend money to a company in return for a contractual return.
Property Share Scheme: You invest through shares in a structure connected to a portfolio of UK property.
Each approach has its own structure, potential returns, responsibilities and risks. The most important thing is to understand how each investment works and how it fits with your own circumstances and goals.
Speak to a Property Investment Consultant
Choosing a property investment is a personal decision. What suits one investor may not be right for another.
Speak to a Portico Investment consultant to discover which type of property investment best matches your circumstances, objectives and investment goals.
Our consultants can explain the different options available, answer your questions and help you understand the key differences between each approach.