The United Kingdom is one of the best places to put your money when it comes to property investment. Besides offering remarkable ROI and capital gains, the country’s legal framework provides several avenues for property investors to make a profit.
Returns on investment
The property market in the United Kingdom has posted some of the best returns in recent history, with average annual returns of up to 10% on buy-to-let property acquisitions. This means that you’re all but guaranteed to have high return yields as long as you select suitable locations and properties.
Students, young professionals living in the city, and larger proportions of the public are willing to rent due to mortgage limitations for first-time buyers. These trends, combined with high unemployment levels resulting from the COVID 19 pandemic, have increased rental demand. They have created ideal circumstances for property investors to enter the market.
A recent study found prime central property in London to be the best performing asset of the last quarter-century, beating gold! This shouldn’t come as a surprise – Prime real estate, especially in central London, holds many of the same properties as gold. It is a status symbol and an investment.
It also benefits from the promise of capital growth derived from demand outstripping supply. The trend is more observable in cities since they usually have the best job opportunities. People will always want to have homes there. This is particularly true for prime UK properties.
In times of crisis, it helps to acquire stable assets as they not only hold better value but will also be the first to recover when the turmoil stops. The UK’s rich culture, employment opportunities, outstanding schools, and universities will continue to attract affluent buyers from all over the world. This will make the UK a great place to purchase a property.
Discounted property prices
You don’t always need to pay the total market value when acquiring a property. There are several ways to pay significantly less. Buying strategies like short leases and cash deals will allow you to spend minimal amounts during the buying process so you can acquire other properties.
Investing in UK properties allows you to implement a variety of strategies that may not be available elsewhere. UK legislation permits several profitable investment methods that include:
Residential buy to let
Buy to let is where you purchase a property then rent it out to tenants for a monthly fee. This property investment strategy offers two types of return – rental income and capital growth. Since property prices in the UK are projected to rise by over 20% in the next 4 years, his approach can help you make significant returns through capital appreciation.
You may also finance your buy to let venture with a mortgage then use the rental returns to meet your monthly obligations. This is particularly effective if your property provides high yields.
Commercial buy to let
Commercial buy to let is a lot like residential buy to let in the sense that it provides capital gains and monthly rental returns. The difference is your tenants will only use the property for business – they can’t live in it. Commercial buy to let targets businesses who need office space or retail space to sell services or products.
These properties often come with longer leases, so they offer remarkable financial security. They also offer higher returns in areas with high demand.
Student buy to let
As the name suggests, student buy to let is where an investor purchases properties purposefully built to house students. The investor then rents the property out to student tenants attending institutions in the area to generate income.
The UK’s student market is growing. University applications rose to record levels in 2020, leading to an increase in demand for accommodation.
Buy to sell/ property flipping.
Buy to sell is a common investment method where investors attempt to generate capital growth returns by purchasing properties than selling them for higher prices after they gain value. The approach may be ideal for you if you’re interested in profitable short-term investments.
The benefit of buy to sell is that you stand to make significant returns if you can successfully add value to your purchase property and sell it at the ideal time (when property prices are rising).
Buy to sell also spares you the cost of property maintenance and other landlord duties.
You may choose to develop a new property yourself
This will involve planning and constructing the building. Once the property is finished, you can sell it for a profit.
One of the biggest benefits of this approach is that it grants you complete freedom over your investment. You get to determine exactly how the property will look without going through the challenges of demolishing a preexisting structure.
Buying via the stock market
One other way to invest in property is by joining a real estate investment trust or REIT. It is an investment vehicle that was introduced in 2007 in the UK to ease the process of investing in property.
At least 3/4 of a REIT’s proceeds must come from rental properties. The trust must also distribute 90% of its earnings to investors in the form of dividends. This guarantees a continuous income that makes the approach ideal for long-term investors.
Buying into private funds
If you’d rather not join the stock market, you may invest in a private property fund. The funds combine individual investor resources to purchase real estate, then hire a team to manage the entire process.
The managers charge the investors a fee, usually a portion of the profits. It may not be easy to join a private fund, especially if you’re just starting out as an investor. It’s because they usually require large minimum investment amounts, which keeps all but the wealthiest participants from taking part.
The UK is a great place for property investing. And, if the forecasts are anything to go by, it’s going to get better.
That said, if you’re planning on entering the UK property investment market, you should first seek the advice of an accredited financial advisor. The markets change considerably each day, so you should have a professional opinion before implementing an investment decision.