There are many factors you need to take into account when committing to a new investment, but arguably one of the most important (and most often overlooked) considerations is your exit strategy.
According to recent research by Experience Invest, based on a survey of more than 800 investors based in the UK, many people are currently in the situation of wanting to offload assets in their portfolio but not being able to do so.
This brings attention to one of the many benefits of real estate investment – that property is relatively easy to sell on the open market.
Find out more by downloading our report: Exiting Investments: How are UK investors planning and executing exit strategies?
Finding the exit
Exit strategies are often dictated by the needs and circumstances of the investor. Some plans will be based on selling the asset after a certain period of time, while others will be contingent on achieving a particular level of return.
Finding the right way to exit an investment is a significant concern for a large proportion of investors, with 80 per cent of respondents to the Experience Invest survey saying they carefully consider their potential exit strategy before committing to an investment.
Despite this, a quarter (25 per cent) of all investors said they are currently locked into investments they are unable to liquidate, although the proportion was lower in the property sector (18 per cent).
One course of action that could prove beneficial on this front is better education around exit strategies for investors and more communication from investment companies.
Nearly two-thirds of respondents (64 per cent) felt investment providers don’t do enough to educate investors about how and when they can offload an asset, while four out of five (80 per cent) called for greater transparency surrounding exit strategies. Transparency could prove particularly important for retail investors, who may have little experience with investing and might not understand the common challenges involved in exiting a deal.
Experience Invest has taken some positive steps to help investors when it comes to offloading their assets. Yield Base is a new platform that allows our clients to resell their student properties, residential units, hotel suites and commercial buy-to-let properties to other investors.
Due to go live towards the end of the summer, this new system will provide more flexibility for investors who might need to exit a deal in a different timeframe to what was originally agreed.
The ability to exit the investment with relative ease and speed is a key consideration for many investors when it comes to selecting an asset class. This is one area where property holds particularly strong appeal.
Nearly three-quarters of investors (72 per cent) said the ease of exiting the investment is a key factor that draws them towards particular asset classes. More than six out of ten (62 per cent) said property is an attractive option because it can be offloaded on the open market.
Jerald Solis, business development and acquisitions director at Experience Invest, said: “It is easy to understand why assets such as property – which can be sold in a relatively straightforward manner on an open market – remain so popular with investors. Nevertheless, all investments should be made with a clear exit strategy in mind; doing so will enable the investor to manage his or her portfolio effectively.”
Other findings showed that 85 per cent of investors see achieving capital growth as highly important when planning an exit strategy, while 73 per cent are motivated by the desire to secure ongoing rental returns. The latter was particularly true of those who had invested in student accommodation (85 per cent) and hotel rooms (88 per cent).
Investors still love real estate
One of the most interesting themes in the UK property market in recent years has been the consistent strength of demand from investors, regardless of external pressures and sources of uncertainty, most notably Brexit.
In fact, the vote to leave the European Union has had certain repercussions that have proven beneficial for UK real estate, particularly in terms of foreign investment. The years since the EU membership referendum have seen the pound lose value against key global currencies like the US dollar, the euro, the Hong Kong dollar and the Emirati dirham, giving international investors the chance to get more value for their money in the UK.
The statistics certainly suggest that property remains a popular investment. More than half (53 per cent) of the investors participating in the Experience Invest study held some sort of property in their portfolio, making it the most common asset ahead of stocks and shares (48 per cent) and foreign currencies (12 per cent).
Earlier research, conducted in the first quarter of 2019, found that more than half (54 per cent) of UK-based real estate investors were looking to buy another property in the 2019-20 financial year, while 89 per cent intended to maintain or expand their portfolios in the coming year.
With so much uncertainty still lingering around Brexit and Britain’s future outside the European Union, there is a good chance domestic and international investors will continue to view UK property as one of the safest asset classes there is.
If you would like to find out more about some of the current investment opportunities available in British real estate, contact Experience Invest today.