As a younger man in my 20s and 30s, the idea of buying and letting property appealed to me.
I liked the idea of borrowing thousands, rolling up my sleeves and filling skips with all the stuff I’d rip out of a property in an effort to turn it around. It seemed like a path to riches, and I couldn’t wait to get stuck in.
And I did. But owning a property for rent requires constant ongoing time, attention and reinvestment of money. As investments go, buying and letting a property demands a lot of you.
Passive income and growth potential
Luckily for me, property prices rose a lot and, in the end, my property investment was worth all the time and effort. However, I wouldn’t get involved in buy-to-let property today because it’s hard for me to imagine property prices rising much in the decades ahead.
But there’s another big reason for me to avoid the hands-on buy-to-let market and that is I’m a much lazier person now than I used to be! Instead, I’d rather seek capital gains and income by investing in the shares of companies running a property business.
For example, Civitas Social Housing (LSE: CSH) pays a dividend yielding around 6%, which I think is attractive. The firm operates as a supported living and social housing Real Estate Investment Trust (REIT), which strikes me as a steady area of activity.
Today’s half-year results report revealed to us some decent progress with the figures. Compared to the equivalent period last year, the net asset value per share rose by 1.1%, the annualised rent role was up by 25% and diluted earnings per share shot up by 40%. The directors put their seal of approval on the outcome by pushing up the interim dividend by 6%.
The company has a portfolio of 599 properties with more than 4,000 tenants and made acquisitions worth just over £10m in the period. The accommodation is for people with learning disabilities, autism, and mental health disorders. There’s also provision for women needing refuge. The average tenant age is just 33 years-old, so it’s a specialist area, but one that strikes me as experiencing high and continuous demand in today’s world (unfortunately).
Supply-demand imbalance
Meanwhile, there’s decent geographic spread because Civitas has properties located in half the local authority areas in England and Wales. Non-executive chairman Michael Wrobel said in the report that there is a “severe” supply-demand imbalance in specialist supported accommodation driven by strong demographic trends. Specialist supported living is “one of the fastest-growing sub-sectors in healthcare real estate.”
My guess is that Civitas will continue to grow its operations in the years ahead. Meanwhile, with the share price close to 89p, you can pick up a few of the shares on a forward-looking earnings multiple of just under 16 for the trading year to March 2021 and the anticipated dividend yield is a little over 6%. The price-to-book value is running at about 0.8. I think the valuation is attractive.