How to afford a flat in Mayfair

I’ve moved my weekly blogging to Mondays. Sundays in the winter were easy to do -- who wouldn’t want to be all cosy and warm typing away for an hour or two. Now that it’s warmer, its harder.

Unfortunately this was a terrible Monday to move structured work to. It’s a sunny day and I’m in my Mayfair office (courtesy of Atom Capital). The morning meeting turned into a coffee in a sunny outdoor cafe. Quick lunch with a colleague turned into sitting outside a cafe in the sunshine. I’m supposed to be home early, but guess what… I’ve just been invited to drinks outdoors….

Beautiful red brick buildings. The posh stores of Bond Street. Mayfair is where the world’s wealthiest buy their homes.

Now given that I will NEVER live here - average house prices are £18 million - I’ll have to enjoy the surroundings during working hours.

I could however, own a teeny weeny slice of a Mayfair by investing in REITs. By purchasing the right UK REIT, even foreign investors can get a piece of the London real estate price action.

REITs -- Real estate investment trusts long popular in the US came to the UK only in 2007 and are still not a very popular asset class. India introduced REITs in 2014.

There are many types of REIT, but basically its a vehicle that purchases a portfolio of real estate concentrating on a certain location or type of building. You purchase shares in REIT much like you would a fund. The REIT is then supposed to return income from the real estate holdings to you.

For example Shaftesbury an REIT just bought commercial property in Carnaby Street (not quite Mayfair, but close enough) for £22 million. That amount of money is hard for even the wealthiest individual investors to cough up for one investment, but since it’s an REIT structure you can hypothetically be part of the investment for the price of one share.

This is a list of UK REITs compiled by the British Property Federation:

Some things to think about

  • Although you can’t control the investment as much, its lower effort than buying and managing a buy-to-let.

  • Most individual investors think only about residential properties but REITs let you access commercial investments like shopping malls, doctors offices and specialised residential such as care homes or student housing.

  • The REIT is already borrowing to create the investment, so if you use leverage to purchase shares, that’s leverage on leverage (remember Lehman Brothers RIP 2008!).

  • You can “own” property far away from you which means you can be more diversified.

That’s all folks. The sunshine calls.