Forget buy-to-let: I think these 2 FTSE 100 property shares can help you make a million

These two property stocks could offer the potential to outperform the FTSE 100 (INDEXFTSE:UKX), as well as buy-to-let, Peter Stephens believes.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

sdf

While investing in property through a buy-to-let has been seen as a worthwhile move for many investors in the past, changes to taxation and regulations could mean buying FTSE 100 property stocks is now a better idea.

When purchased through a Stocks and Shares ISA, for example, there’s no tax to pay on income or capital growth. And with a number of FTSE 100 property stocks currently providing wide margins of safety, they may offer better value for money than buy-to-let investments.

With that in mind, here are two large-cap stocks that could increase your chances of making a million compared to undertaking a buy-to-let.

Should you invest £1,000 in Berkeley Group right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Berkeley Group made the list?

See the 6 stocks

Berkeley Group

Housebuilder Berkeley (LSE: BKG) released results for the 2019 financial year on Wednesday. They showed its pre-tax profit was at the top end of guidance, hitting £775.2m. This reflected resilient trading during the year, and allowed the company to increase its net cash position to £975m.

During the 12 months, Berkeley added 14 new sites to its land bank. Its Net Promoter Score of 73.5 is also on a par with a variety of highly-respected consumer brands.

Looking ahead however, the company expects its pre-tax profit for the 2020 financial year to fall by a third. This, though, is in line with previous guidance, and reflects a somewhat challenging operating environment.

But with the company’s shares trading on a price-to-earnings (P/E) ratio of around 11, it seems to offer a sufficiently wide margin of safety to merit investment. With a generous shareholder returns plan, it could offer an impressive mix of income and capital growth.

Persimmon

Offering even better value for money than Berkeley is fellow housebuilder Persimmon (LSE: PSN). It currently trades on a P/E ratio of just 7. This suggests investors are anticipating a sharp decline in its financial performance, which could present a buying opportunity for long-term investors.

Although there are possible risks facing the UK property market, such as a weaker economic performance due to Brexit and an end of the Help to Buy scheme, Persimmon’s financial prospects appear to be encouraging.

In the current year, for example, it’s forecast to deliver a rise in net profit of 3%. And with recent updates from the company suggesting demand for new homes remains high, it could enjoy robust operating conditions over the coming years.

With the company having a generous shareholder return plan, it’s expected to yield around 12% in the current year. Since it has a net cash position, as well as an improving financial outlook, its dividend payments may be more affordable and sustainable over the long run than many investors realise.

As such, it could be a worthwhile purchase for value and income investors, appearing to offer a significantly greater chance of making a million than undertaking a buy-to-let investment.

AI Revolution Awaits: Uncover Top Stock Picks for Massive Potential Gains!

Buckle up because we're about to dive headfirst into the electrifying world of AI.

Imagine this: you make a single savvy investment in some cutting-edge technology, then kick back and watch as it revolutionises entire industries and potentially even lines your pockets.

If the mere thought of riding this AI wave excites you and the prospect of massive potential returns gets your pulse racing, then you’ve got to check out this Motley Fool Share Advisor report – 'AI Front Runners: 3 Surprising Stocks Riding The AI Wave’!

And here’s the kicker – we’re giving you an exclusive peek at ONE of these top AI stock picks, absolutely free! How’s that for a bit of brilliance?

Get your free AI stock pick

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens owns shares of Berkeley Group Holdings and Persimmon. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Close-up of a woman holding modern polymer ten, twenty and fifty pound notes.
Growth Shares

This FTSE 250 stock has beaten the index by around 10x over the last year

Jon Smith rates a FTSE 250 stock that has smashed the broader index performance and could keep going based on…

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

B&M shares are at record lows! Is now the time to consider buying?

The retailer, demoted from the FTSE 100 to the FTSE 250 last year, continues to struggle. But are B&M shares…

Read more »

Investing For Beginners

2 reasons why the stock market could hit 10,000 points by December

Jon Smith explains how the makeup of the UK stock market and the current valuation could support a move towards…

Read more »

Queen Street, one of Cardiff's main shopping streets, busy with Saturday shoppers.
Investing Articles

Why this FTSE 100 rocket is this investment trust’s number 1 holding

A UK investment trust is certainly going against the grain by having this FTSE 100 share as a high-conviction holding…

Read more »

UK financial background: share prices and stock graph overlaid on an image of the Union Jack
Investing Articles

These 2 FTSE growth stocks jumped 8% and 4.5% today!

Ben McPoland takes a closer look at a pair of FTSE stocks that are performing really well recently. Why are…

Read more »

Road 2025 to 2032 new year direction concept
Investing Articles

This under‑the‑radar FTSE 100 growth stock is also a secret dividend superstar!

Harvey Jones belatedly wakes up to a brilliant FTSE 100 growth stock that has an equally remarkable track record of…

Read more »

Business manager working at a pub doing the accountancy and some paperwork using a laptop computer
Investing Articles

Barratt Redrow share price plunges 9% on profits hit – time to consider buying?

Harvey Jones says FTSE 100 housebuilders continue to suffer with the Barratt Redrow share price slumping on a profit warning.…

Read more »

UK financial background: share prices and stock graph overlaid on an image of the Union Jack
Growth Shares

Why the next month could make or break the Lloyds share price

Jon Smith outlines two key events in coming weeks that could influence the Lloyds share price, leading him to make…

Read more »