Investing in Property
If you are looking to delve into property investment, then the United Kingdom is an incredible country to do so. Today, the United Kingdom is one of the most prominent property investment markets in the world. It offers growing house prices, high rental yields and so much more.
If you're eager to know the different types of UK property investment and the opportunities that present themselves in the niche, then this guide is for you. Not just that, the guide also explores the reasons why you should consider investing in UK properties for 2021 and beyond.
But before we go any further, it's important to ask the question: What is "Property Investment"?
Property investment is any investment made to purchase a property for the sole purpose of yielding income. And in the United Kingdom, property investment can produce a high return on investment be it in the form of capital growth or rental returns. Capital growth is the increase in the value of property over time.
To be able to invest in any property in the United Kingdom and become profitable, there are three fundamental steps you must take. These include;
Exploring various investment options
Knowing all costs involved
Discovering the right property and completing the sale
Exploring Various Investment Options
There are various routes one could follow when investing in UK properties and one must evaluate every available option. By exploring these options, one is sure to find the property strategy that best suits them.
For some investors, they prefer to purchase residential properties for buy to sell or buy to let investments. And for some, they prefer to go for a less conventional UK property investment option.
However, in general, there are seven different investment options one can consider before investing in a UK property. These include;
Residential Buy to Let
The Buy to Let investment also known as Buy to Rent is one of the commonest strategies explored by property investors in the UK. It involves buying a residential property and leasing it out to earn rental income.
Student Buy to Let
The Student Buy to Let investment property strategy involves property investors purchasing a property for the sole purpose of accommodating students.
Commercial Buy to Let
The commercial Buy to Let strategy is also popular among property investors. However, unlike the residential Buy to Let, Commercial Buy to Let involves purchasing properties that serve for commercial purposes such as catering or office space to rent out.
Holiday Lets
If you're looking to invest in a property that offers a profitable short-term return then Holiday Let's maybe your best bet. Holiday Lets are quite similar to Buy to Let in that they offer rental income but it is usually in the short term.
People looking for a home to reside in while visiting the country usually rent Holiday Lets for the time of their stay (usually short). Property investors usually advertise Holiday Lets on websites such as Airbnb to potential clients.
Buy to Sell
The Buy to sell strategy is also common among UK property investors also known as “flips”. Investors purchase a property to then sell it off at a higher price to earn capital growth returns.
The Buy to Sell strategy is ideal for investors looking to earn a large sum of money via short-term investment. The strategy involves getting a property, renovating it, and then selling it off.
Property Development
The property development strategy is similar to Buy to Sell. However, investors opt to build a new property themselves to sell off for profit. This strategy is ideal for investors who want complete freedom over the affairs of their venture.
REITs
REIT stands for Real Estate Investment Trusts and this strategy is best for property investors who prefer not to invest directly in UK properties.
Investors trade these REITs like stocks with a real estate investment trust making it a liquid type of investment. It's popular among property investors who love the stock market kind of investment.
Know all Costs Included
Asides from the property price, purchasing property in the UK comes with additional costs. Below is a list of some of the substantial costs associated with making a UK property investment.
Local Searches and Solicitor Fees
Property investors in the United Kingdom usually need a solicitor to perform all the required legal and formal paperwork. The solicitor charges an average fee that is between £850 and £1,500. But to finalise local searches an extra fee of roughly £250 to £300 is to be paid.
Other substantial costs are;
Survey Fees
Estate Agency Fees
Mortgage Broker Fees
Insurance Costs
Stamp Duty (Land Transaction Tax in Wales) Costs
Remortgage Fees
Agency Fees
Tenant Referencing Checks
Discover the Right Property
Finding the right property is usually overwhelming, especially for first-time buyers. This is because this is where the bulk of personal research lies. In finding the right property, you must research potential areas, the market, and target tenants before choosing a property.
In terms of potential areas, property investment statistics suggests that the Northwest region of the United Kingdom has the highest potential for property investment. The Northwest region has the highest rental yields, growth rates, and a rapidly developing rental market in the United Kingdom. Not too far behind is Cardiff “the most sociable city in the UK”, average house prices have increased to £256719 in January 2021 which is an increase of 6% from early 2020 and recent purchase prices indicate a huge increase again even through the pandemic.
Recognising and knowing your target tenant is another important component of UK property investment. The more you understand and carry out research on your target tenant, the more you know the kind of property you want. Furthermore, you're able to identify the opportunities that present themselves.
Finalise the Sale
After identifying the property you want to invest in, the last and final step is to finalise the sale. However, if you will be purchasing such property with a mortgage, you will need to arrange your mortgage. Then you're able to finalise the sale.
Once you can arrange your mortgage, you exchange the contract and put pen to paper on necessary documents given that you've made the required deposit for the property.
Conclusion
Investing in properties is a big decision. It is one of the highly profitable investments one can venture into in this present time. However, you should have it at the back of your mind that it can easily drain you of your cash as it can easily give returns. So, ensure you're not doing more than necessary to secure a property as you don't want to be left struggling just after purchase.
