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Best 7 Property ISAs For 2020 Compared

Considering expanding your portfolio into property? We explore why Property ISAs should be on your radar.
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Author: Edith Muthoni
Last Updated: March 24, 2020
Property ISA
Property ISA

Recflective skyline of skyscrapersInnovative Finance ISAs (IFISA) give you the freedom to invest your cash in different sectors of the economy such as buying stocks and shares, or investing in the property (real estate) market. In this article, we discuss why you should forego the low return-cash ISAs or the inconsistent and highly volatile shares and stock investments and consider the ever-expanding property investments.

 

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    What is a Property ISA? The Property ISA refers to either using your tax-free maximum allowable income to invest in property-related businesses or buying property-related shares. Property ISA presents you with a better investment option when compared to conventional real estate investing as they only invest your cash in pieces of real estate vetted by their team of property experts.

    How does property ISA work?

    Property ISA can be considered to be an offshoot of peer to peer lending where most investors pool together resources that are then advanced to real estate companies or used in the purchase of property-related stocks and shares Investments in either niche are facilitated by the different peer to peer lending companies.The word 'How' with a magnifying glass

    These are considerably different from each other when it comes to their rate of return, number and type of accounts you can open as well as the markets in which they invest your funds. The security of your investments and how much you make by investing in a property ISA is therefore hugely dependent on your choice of a P2P lender. We have however taken time to vet different property ISA market lenders and came up with what we consider the most reliable and trustworthy property ISA investors.

    The top 5 property isas for 2020: Reviewer’s choice

    REVIEWERS CHOICE

    Property Crowd – Property ISAs

    Rating

    Account Type

    Property ISAs

    Interest Rate

    11% per anum

    Initial Deposit

    £1,000

    Rating

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    Product Details

    • Most appealing to investors that yearn for both transparency and high yields

    Key Facts

    • The borrower gives you access to all property documents – like surveyor and valuation reports
    • Invest £1000 and earn interests of up to 11% p.a
    • Your deposits are secured by the properties you invest in

    Pros

    • Most attractive annual returns
    • Easy to join and invest here
    • Short maturity terms, as low as 6 months
    • Deep research on investments help you decide on the right investment

    Cons

    • Not beginner friendly
    • Not FSCS insured

    CapitalRise – Property ISA

    Rating

    Account Type

    Property ISA account

    Interest Rate

    8-12% per anum

    Initial Deposit

    £1,000

    Rating

    Visit Now

    Product Details

    • Your go-to Lender for individuals looking for the widest range of investment opportunities

    Key Facts

    • Incomes from IFISA accounts are tax exempt
    • Transfer in and out of your capital rise ISA account freely
    • Enjoy some of the highest interest rates of up to 12% p.a

    Pros

    • Attractive annual return
    • Easy to register and maintain a property ISA account here
    • Broad investments options to choose from
    • Beginner friendly

    Cons

    • One may consider the £1,000 minimum investment quite unaffordable

    HouseCrowd

    Rating

    Account Type

    Property ISa

    Interest Rate

    7% per anum

    Initial Deposit

    £1,000

    Rating

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    Product Details

    • Best for investors searching for a wholly automated investment process

    Key Facts

    • The tax-free interest of 7% p.a is paid semi-annually
    • Wide range of investment options
    • Interests can be compounded for profit maximization

    Pros

    • Automated investing speeds up capital growth
    • Transparent operations with regards to fees and incomes
    • Investment process automation makes this a 100% passive income stream

    Cons

    • One might consider their £1,000 minimum deposit considerably high

    Propio Property

    Rating

    Account Type

    Property ISA

    Interest Rate

    7% per anum

    Initial Deposit

    £100

    Rating

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    Product Details

    • Most adapted for investors looking for a tiered investment strategy based on risk tolerance

    Key Facts

    • Hosts beginner, intermediate, and advanced investor categories
    • Investments have an average maturity period of 12 months
    • All loans are secured thus minimizing default risk

    Pros

    • Beginner friendly
    • Diversified investment portfolios minimize risk
    • Short loan maturity periods
    • Secured loans give you peace of mind about the possibility of defaulting

    Cons

    • Doesn't support monthly direct debit
    • Highly illiquid due to the lack of secondary market

    BrickLane

    Rating

    Account Type

    Property ISAs

    Interest Rate

    6.7%

    Initial Deposit

    £100

    Rating

    Visit Now

    Product Details

    • Point of contact for investors eyeing the UK residential property niche

    Key Facts

    • Get to earn both rental income and share growth
    • Invest as low as £100 and earn above-industry-average-rates of up to 6.7% p.a
    • The automated investment process makes the investment process wholly passive

    Pros

    • Two-tier earning strategy
    • Low minimum deposit amounts - £100
    • Beginner friendly
    • User friendly platforms accessible online from anywhere across the world

    Cons

    • Comes with lengthy investment liquidation process
    • Specialization locks it out of the more profitable commercial real estate niche

    Why invest in a property ISA?

    • Higher rate of return: You stand to gain more from a property ISA investment than you ever would with cash ISA or share and stocks ISA. Note that cash ISA’s rate of returns has stagnated around 2% and while the shares and stock markets may post in excess of 20% returns in one trade, they can as easily post a 30% loss in another making them a fairly inconsistent income source.
    • Secured investments: Property ISA can be considered one of the most secure investments given that they lend to businesses that commit their directors or business assets as collateral for the loan. Chances of losing money to defaulters are therefore considerably slim.
    • Less volatile: Unlike shares and stocks ISAs, most Property ISA instruments aren’t listed or traded on the public exchanges. They are therefore sheltered from volatilities that rig their stock and share counterparts.
    • Higher opportunity for growth: The fewer volatilities, high returns, and low risks make property ISA’s the most viable option when it comes to growing your investments. You, therefore, are better off hosting your growth accounts such as retirement and Help-To-Buy accounts with a property ISA lender.
    • Launchpad for personal property investments: You can also use the property ISA accounts to establish a financial base that you may in turn use to launch your goals. For instance, are you looking to start a business or even venture into the real estate industry? You can use the property to consolidate funds and earn higher interests that help actualize these goals.

    What are the advantages and disadvantages of investing in Property ISA?

    Pros

    • Shields your investments from taxation
    • Helps kick in or reignite a saving culture
    • Present you with 100% passive stream
    • Investments here, unlike rental property investments, are easier to liquidate
    • Investments here can be used as collateral to obtain funds to solve emergencies

    Cons

    • All investments in IFISAs with P2P / crowdfunding platforms, invested capital is at risk and returns are not guaranteed.
    • Accumulating significant resources with a £20,000 maximum allowable takes time
    • Riskier than such other investments as treasury bills or bonds or cash ISA
    • Subjected to management and administration fees, around 1% of total investment

    Criteria used to rate these Property ISA companies

    When it comes to choosing an investment vehicle for your savings, we understand that it is not just about attractive returns and security guarantee, a good investment should be wholly encompassing. Here are some of the features that we believe every viable investment opportunity must possess and what we prioritized on when vetting Property ISAs:

    • Attractive returns on investment
    • Proper risk management features that guarantee minimal risk to the investment
    • Ease of investment liquidation
    • Borrower screening process
    • Types of accounts supported on the platform
    • Reliability of the property ISA service provider

    Best property ISA companies

    1. PropertyCrowd ISA – 11% per annum

    At 11% annual rate of return, PropertyCrowd promises a higher rate than any other legit Property ISA company we have come across yet. But this isn’t the only thing we like about the investment company, we were also drawn in by their transparent investment model that gives you full access to the deal you are about to commit your funds to.

    You get access to such documents as surveyor and valuation reports that are regularly updated for the independent deals. According to the investment company, these deals have for the longest time been a preserve of the institutional investors and capital advancements are normally on a short term basis, usually between 6 and 24 months.

    PropertyCrowd further guarantees the security of your investments as properties being invested in often serve as collateral. To benefit from all this, however, you will need to commit with a minimum deposit of £1,000.

    Our Rating

    • Most attractive annual returns
    • Easy to join and invest here
    • Short maturity terms, as low as 6 months
    • Not beginner friendly
    • Not FSCS insured

    2. CapitalRise property ISA – potential return of 8-12% per annum

    CapitalRise is a property-oriented lender that specializes in lending capital to prime property developers. It maintains three classes of investments that you can choose from, offering 8-12% p.a. potential return on your investment amount. These include the development, Bridging and Sales Period opportunities that involve funds to complete projects, funds to acquire new properties and funds to finance an existing development loan respectively. Ideally, you don’t need an IFISA account to invest here but having one ensures that your gains are exempted from taxes.

    Apart from the attractive potential return package, some of the factors that we liked most about CapitalRise include the fact that they have a relatively straightforward account setup process. The lender also accepts unlimited transfers from external ISA accounts. And just like PropertyCrowd, you will need £1,000 minimum deposit to maintain an account here.

    • Attractive annual return
    • Easy to register and maintain a property ISA account here
    • Broad types of investments to choose from
    • One may consider the £1,000 minimum investment quite unaffordable

    3. HouseCrowd Property ISA – 7% per annum

    There are two ways of joining HouseCrowd, by way of registering a new account on their website and funding it with their required minimum investment £1000, or by transferring in your ISA deposits from another investment company. Either gives you access to the investment market where you can choose different types of properties to invest in with an average annual rate of return set at 7%.

    It might interest you to know that the property loans lender is often running cashback promotions with the most recent being the £50 reward for investments below £10,000 and £100 for anything else above that. Your investments will also start accumulating interests within 14 days of funding your account which is paid semi-annually. More importantly, the investor allows for the compounding of interests for profit maximization as well as automated investment tools that allow for the loans and risk diversification.

    • Automated investing speeds up capital growth
    • Quite transparent operations with regards to fees and incomes
    • Investment process automation makes this a 100% passive income stream
    • One might consider their £1,000 minimum deposit considerably high

    4. Propio Property ISA – 7% per annum

    Propio property investment company makes it here not just because of its support for ISA investments and relatively attractive rates of 7% annually, but also because of their product diversification. The investment service provider may as well go on record as one of the most beginner friendly property loans lender we have come across yet. Plus the fact that most loans here have a relatively short repayment period of about average 12 months. After registering or transferring your ISA funds here, you will have to decide on the investment class category based on your risk tolerance.

    Cautious, the safest and specially designed for beginners trying property investing for the first time, attracts 3% annual returns, Balanced, which is designed for investors looking to balance their risk and reward, attracts 5% in annual returns while the most experienced investors with more disposable income that allows for proper diversification can opt for the Adventurous package that attracts 7% annual returns.

    • Diversified investment portfolios minimize risk
    • Short loan maturity periods
    • Secured loans give you peace of mind about the possibility of defaulting
    • Doesn't support monthly direct debit
    • Highly illiquid due to the lack of secondary market

    5. Bricklane property ISA – 6.7% per annum

    Bricklane is by far the largest residential property investor in the U.K and promises to earn you over 6.7% annually if you invest in one of its portfolios. The investment company specializes in pure residential property investments, implying that your money is invested in acquiring residential properties whose returns include a combination of both rental value the property value rise. The two are reviewed every fortnight and changes immediately updated on your investor account dashboard.

    Apart from the pure residential investment model, other unique factors about Bricklane include the fact that minimum investments here start from £100. Investments are also automated and you get to start enjoying returns immediately. They also maintain one of the most user-friendly platforms from where you can track the performance of your invested amounts as well as request for withdrawals.

    • Two-tier earning strategy
    • Use friendly platforms accessible online from anywhere across the world
    • Low minimum deposit amounts - £100
    • The lengthy investment liquidation process
    • Specialization locks it out of the more profitable commercial real estate niche

    6. Assetz Capital – 5.5%. per annum

    If you are into guaranteed incomes in the form of fixed returns, you will like Assetz Capital’s Property Secured account. This works best for investment beginners and anyone else looking for a perfect balance between safeguarding their investments and income. Investments into this pool attract annual interest income of 5.5% with key safeguards including collaterals with reasonable loans to assets ratios. The interest is available for withdrawal as soon it is realized, but you can opt for the automatic re-investment if you wish to grow your investments over time.

    If you opened the secured property account with your ISA funds, you still get to enjoy all the perks it brings along such as tax-free returns and no withdrawal fee. And these go a long way in further burgeoning your investments. We noticed that typical investments here range from 6 months to 5 years. The property investment service provider, however, allows for the sale of your loan interests in their secondary market.

    • Attractive fixed income rate
    • Secured loans give you peace of mind about your investment and risks
    • A steady source of income where interest is made available as soon as it is realized
    • Single account has little investment options for diversification

    Bottom line

    The security of the invested amounts and potential returns almost always dominate the investment decision. This explains why the most risk-averse investors go for the some of the best UK ISAs for 2020 even though their net returns are laughable. The most aggressive on the other hand often chase after stocks and shares and risk losing their yearly or lifetime savings with a few trades. Property ISA investments, however, present you with a balanced approach by promising the security that’s associated with cash ISA and the returns achieved by most Shares without exposing you to dangerous volatilities.

    Property ISA investment companies achieve this by lending to the fastest-growing markets, both commercial and residential, but securing these cash loans with collaterals that is more valuable than the loans. This gives you the assurance that should they default, the lender can dispose of the asset to recover your funds. And you don’t have to worry about liquidity as the lender either has a secondary market where you can sell your investment, buys back the loan on a monthly basis or makes it possible to borrow funds while using their investment as a guarantee.

    MoneyFarm

    Our Rating

    MoneyFarm - ISA rates
    • Transfer out your savings when you need to
    • Invest in highly diversified portfolios
    • A personal adviser to help you get started with your investment
    • Expert portfolio management
    MoneyFarm - ISA rates

    Glossary Of ISA Terms

    Trading Platforms Glossary
    Cash ISA

    A cash ISA is a form of Personal Savings Allowance that works like ordinary savings account safe for the fact that you don’t pay tax on interests earned. It is tax-free savings account for UK citizens. The maximum you can invest in this ISA for the year 2020 is £20,000

    ISA Glossary
    Stock and Shares ISA

    A share and stock ISA is a tax-free investment account provided by a brokerage that lets you invest in a wide range of securities including individual shares and stocks, trusts, and funds. Tax-free means that you don’t get to pay dividend tax or capital gains tax on the shares and stock incomes. The maximum you can invest in this ISA for the year 2020 is £20,000

    Trading Platforms Glossary
    Innovative Finance ISA

    Innovative Finance ISA is a tax-free investment account that lets you invest in the peer to peer lending platforms. The maximum you can invest in this ISA for the year 2020 is £20,000

    ISA Glossary
    Junior ISA

    A junior ISA is a tax-free and long term Child Trust Fund that a parent or guardian can open for their underage children. A 16-year old can also open a Junior ISA but will only access the funds therein once they turn 18. The maximum you can invest in this ISA for the year 2020 is £4,368

    ISA Glossary
    Property ISA

    A property ISA is simply a share and stock ISA that will only invest in residential real estate properties. It is a share and stock ISA that buys solely into residential property portfolios.

    Trading Platforms Glossary
    Lifetime ISA

    A lifetime ISA is a savings account available to individuals between 18 and 40 years who are looking to save for a comfortable retirement. A Lifetime ISA account holder can deposit £4,000 into the account for 2020, and with every contribution, the government tops it up with a 25% bonus. You will not be able to contribute to the ISA once you reach 50 years and the funds can be used for retirement or re-channeled towards purchasing your first home.

    ISA Glossary
    Easy Access ISA

    An easy access ISA is simply a form of cash ISA that makes room for regular withdrawals of earned profits. It is mostly associated with cash ISAs that pay variable terms and allows you to withdraw the tax-free income gained here regularly. The maximum you can invest in this ISA for the year 2020 is £20,000

    ISA Glossary
    Fixed-Rate ISA

    A fixed-rate ISA is a form of Cash ISA that pays fixed interest rates on savings. The funds in the account have to be locked for a predetermined period of time – usually between 1 and 5 years- with premature withdrawals attracting heavy penalties.

    ISA Glossary
    Retirement ISA

    A retirement ISA is a savings account available to individuals between 18 and 40 years who are looking to save for a comfortable retirement. A retirement ISA account holder can deposit £4,000 into the account for 2020, and with every contribution, the government tops it up with a 25% bonus. You will not be able to contribute to the ISA once you reach 50 years and the funds can be used for retirement or rechanneled towards purchasing your first home.

    ISA Glossary
    Help-To-Buy ISAs

    A Help To Buy ISA is a special saving account designed by the U.K. government to help its citizens save for a mortgage deposit for their first home. You can only save up to £200 per month into the help to buy ISA with the government topping you up with an additional 25% bonus. Plus, help to buy ISA is only available to individuals and couples looking to buy their first home.

    FAQs

    How much do I need to invest in a property ISA project?

    In any given financial year, you can only invest a maximum £20,000 in a property ISA account. There is however no minimum limit to how much you can invest here and lenders have the right to express their discretion with regards to the minimum deposit acceptable on their platform.

    How much can I make from a property ISA investment?

    How much you make from your investment of ISA allocation in property investment depends on such factors as your risk tolerance, invested amounts, and the lender’s annual rates. Note that the more risk averse you are, the less you make and vice versa.

    How does property IAS investment work?

    When you deposit your cash with a property investment lender, they then advance it to property and real estate companies who for one reason or another cannot get similar service from mainstream banks. When they repay, the lender takes a facilitation fee and passes over the rest to you as income.

    What is the difference between property ISA and lifetime ISA?

    What charges are applicable on the property ISA investment account?

    Property ISAs are tax-free and not subject to unnecessary fees. Most investment companies will, however, impose a fee if you wish to terminate your investment before maturity or transfer your deposits to another investment company.

    When can I withdraw my earnings from a property ISA savings account?

    Your earnings plus the principal amount are made available upon the maturity of your investment. Some lenders will, however, avail the interest on a monthly, quarterly semi-annual or annual basis.

    How do Property ISA companies protect my invested amounts?

    By ensuring that they secure every pound lent out with an asset as its security. Some lenders adopt what they consider a reasonable loan-to-assets ratio approach when determining the value of the asset to claim as collateral while others insist on holding onto assets that are more valuable that advanced cash.

    Are there risks associated with investing in property ISA account?

    Yes, loan defaulting. This remains the biggest threat to peer-to-peer lending, whether you are dealing with property or personalized loans.

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    Edith is an investment writer, trader, and personal finance coach specializing in investments advice around the fintech niche. Her fields of expertise include stocks, commodities, forex, indices, bonds, and cryptocurrency investments. She holds a Masters degree in Economics with years of experience as a banker-cum-investment analyst. She is currently the chief editor, learnbonds.com where she specializes in spotting investment opportunities in the emerging financial technology scene and coming up with practical strategies for their exploitation. She also helps her clients identify and take advantage of investment opportunities in the disruptive Fintech world.

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