.png)
Top 10 Property Investment Strategies You Should Consider in the UK - RWinvest
- Damian Murray
- Dec 16, 2022
- 9 min read
Top 10 Property Investment Strategies You Should Consider in the UK - RWinvest
Property investing in UK continues to grow in popularity, however it’s getting increasingly harder to choose the best property investment strategy.
This article from RWinvest, written by Senior Property Writer Daniel Williams mentioned the top 10 best property investment strategies you should consider in 2022. Read more on this article to get the best investment ideas UK property has to offer.
As investing in UK property continues to grow in popularity, it’s becoming increasingly harder to settle on an ideal property investment strategy.
With so many options to choose from, you may feel overwhelmed at all the property investment strategies you have at your disposal.
But fear not, as on this page you’ll find the top 10 best property investment strategies you should consider in 2022.
Here, we’ll give you the best investment ideas UK property has to offer, and provide effective alternative property investments perfect for 2022.
Let’s get started.
What Are the Best Property Investment Strategies UK?
When it comes to investing in the UK property market, property investors have three main choices.
They can invest in a rental property and rent to tenants for a profit.
Property investors can buy an investment property and sell for a profit.
A property investor can own a share of a company that owns property on their behalf.
However, it can get a bit more complicated than that, with different property strategies falling into each of these categories, all coming with their own pros and cons and varying suitability for different people.
This is exactly what we’re going to discuss in this guide as we break down the pros and cons of the best property investment strategies UK real estate has to offer.
1. Single Let Residential Property
As far as rental properties go, single let is likely the most traditional and easy to understand example of property strategies UK.
A single let residential property is real estate that is rented to a single ‘tenant’, which can be an individual person or an entire family.
Single let residential property has been long considered the best property investment strategy in the UK for two main reasons.
Rental Income – Those property investing can earn monthly rent each month, which recently reached an all-time high of £1,061 PCM in the residential UK market.
Long Term Growth – Despite the pressures of Covid-19, UK property prices have increased by 11% in the last 12 months according to the Land Registry, which is set to increase by a further 18.8% by 2026 according to predictions from Savills.
For these reasons, you can expect a lucrative strategy when buying property. Be sure to check out our full guide to single let buy to let property to learn more information about this top house investment strategy.
Top Tip: To make the most out of your buy to let property investment and become a successful investor, be sure to focus on areas with a high young professional population as they are the age group most likely to rent for the foreseeable future. This is because younger people are more drawn to renting, whether through choice or lack of financial ability to purchase a home of their own.
Pros
A less risky buy to let strategy, with residential property in huge demand.
Easy to get started without expert knowledge.
Allows investors to make consistent rental income, with high rental yields available in certain UK areas.
Generates two types of returns through a combination of rental returns and capital growth returns when the investor sells the property.
Less time-consuming than some other rental property investment strategies, with the option to hire a rental management company for a hands-off investment.
Cons
Residential buy to let is considered a long term investment, so not the best choice for those looking to quickly make significant short-term returns.
Potential void periods if investing in an area without high rental demand.
2.Purpose-Built Student Accommodation
A top contender for the best property investment strategy, purpose-built student accommodation has shot up in popularity since 2019.
Purpose-built student accommodation is another type of buy to let property investing strategy. The only real difference is that with PBSA you will rent exclusively to student tenants.
A report from Savills in early 2021 found that over £5.77 billion was spent on student accommodation in 2020 – the highest-ever amount in one year.
This goes alongside a thriving UK student market that has seen an 8.4% rise in student applications in 2021.
With many students seeking stylish and well-located accommodation to live in during their time at university, there’s likely never been a better time to invest in a student buy to let strategy.
You can learn more about student property investment in our detailed ultimate guide for 2022.
Top tip: Focus on student cities with a high student population and graduate retention rate to ensure tenant demand. Examples of top student cities include Liverpool, Manchester, Birmingham, Leeds, London and Newcastle.
Pros
A good option for first-time investors due to low property prices and high yields.
Offers a combination of rental income and capital appreciation for maximum returns.
High and consistent rental demand due to booming UK student property market.
Hands-off investment options make student buy to let easy and hassle-free.
Cons
May not see as high capital growth returns as you do with residential buy to let.
Limited to one tenant group.
3. HMOs
A top choice for any property portfolio, an HMO is another excellent example of top property strategies UK.
An HMO, otherwise known as a house of multiple occupancy is real estate that is rented out to multiple tenants who each pay rent and have shared facilities like a bathroom and kitchen.
Certain types of student accommodation fall under the category of an HMO, with shared student houses being an alternative to purpose-built student accommodation.
HMOs have fallen in popularity amongst students in recent years, who are opting to live in higher-quality accommodation that can’t be provided by HMOs that tend to be older buildings.
So, while a property investor can earn some huge returns on the HMO property market, it’s likely no longer the best property investment strategy to target students.
You can learn more about HMOs and other student investments by reading our guide to how to invest in student property.
Pros
Offers the chance to generate income from multiple different tenants at once, resulting in high yields.
If one tenant stops paying their rent, you’ll still have rental income from the other tenants to fall back on.
Cons
This type of investment strategy comes with more complex tax rules, planning requirements, and legislation requirements.
Difficult to obtain a buy to let mortgage for HMO properties.
More management is involved, which makes this property investment strategy more time-consuming.
As the demand for more luxury private accommodation increases, people may be less inclined to rent shared properties.
4. Buy to Sell / Property Development
The first non buy to let strategy on this list, buy to sell is one of the most popular property investment strategies in the UK.
Buy to sell, otherwise known as house flipping, is when an investor purchases a property that needs refurbishment and sells it on for a profit.
Buy to sell is usually grouped up with property development, as investors will typically need to complete renovation work to boost the value and appeal to potential buyers.
Unlike a buy to let strategy, this kind of property investment strategy doesn’t involve renting the property out to tenants, and doesn’t rely on a regular income.
Instead, it relies on a strong property market and positive market conditions with high demand. This seems to be the case in 2022, with a report from Rightmove finding that buyer demand per property for sale is twice as high as pre-pandemic levels.
Of course, you can also completely become a property developer and build one property from the ground up.
If this is something of interest, check out our full guide to how to become a property developer to learn more about securing planning permission and making a good investment.
Pros
Potential to make large rental returns if you can add value to the property with renovations and capital growth.
Don’t need to deal with tenants and rental property management duties.
Cons
Buy to sell is a very hands-on method of property investing, requiring time and expertise to succeed.
Could lose money if not done right.
It can be costly depending on the level of renovation needed to increase property value.
5. Commercial Buy to Let
When it comes to property strategies UK and property investment ideas, an effective choice in 2022 is commercial buy to let.
Here, an investor will purchase a commercial building, which can include an office block or retail space, and rent it out exclusively to companies and business owners.
While investors may struggle to find sellers for commercial property, commercial buildings tend to have longer lease periods than traditional buy to let, making it easier to secure a long term tenant and get a consistent cash flow.
However, commercial property can be hit heavily in times of economic struggle like the financial crisis, something that a potential property investor should keep in mind before they decide to choose this alternative property investment to traditional buy to let.
Pros
Lease lengths for commercial buy to let tend to be longer than residential buy to let property investment strategies.
There are certain tax advantages involved.
Cons
Finding the right tenant can take a long time, meaning more extended void periods in between tenants.
Buy to let mortgages can be more costly compared to residential buy to let.
In times of recession or economic uncertainty, the commercial property market tends to be hit hard.
6. Holiday Lets
Increasingly popular amongst those searching for property investment ideas, holiday lets are another type of buy to let property investment strategy that many UK investors opt for.
Like residential or student buy to let, investing in a holiday let involves purchasing a property – whether a house or apartment – and then renting it out for income.
These types of properties are let out on a short-term basis as they’re rented by those seeking somewhere to stay while on holiday. For those unsure of the difference between long-term vs short-term rent, holiday lets are a perfect example of short-term rent investments.
These properties will typically be listed on websites like Airbnb and other platforms used to showcase holiday rentals.
Pros
Holiday lets allow investors to make attractive rental income depending on the quality and popularity of the property.
Better tax benefits compared to traditional buy to let.
Cons
Finding a buy to let mortgage can be tricky.
A lot of work is involved in maintaining and marketing the property.
The property could go empty for long periods, especially if it’s based in an area that sees more seasonal demand, such as a seaside town.
7. Hotel Lets
If you’re looking for alternative property investments UK, hotel lets are an incredibly niche investment strategy you likely may not have thought of when considering a rental property investment strategy.
Hotel room investments are when an investor purchases a room within a hotel and generates income from guest stays.
Instead of having a full-time tenant like other buy to let strategies, an investor will gain income from those travelling for business or a holiday.
Hotel lets are ideal for UK investors who want a completely hands-off investment when investing in property.
Pros
It can be possible to make large returns if the hotel is popular and generates a lot of demand.
A hands-off strategy with no need to deal with tenants.
Cons
Because a hotel is essentially a business, you’re at risk of the hotel failing, damaging your investment.
If the hotel doesn’t see a lot of demand, you will lose income due to void periods.
The hotel’s reputation is out of your control, and bad customer reviews could impact demand.
8. Property Crowdfunding Getting into more niche alternative property investments, property crowdfunding is an interesting strategy for those looking to indirectly own property. Property crowdfunding is when a group of investors pool together their funds to buy real estate, with each investor owning a share of the asset. While you can do this with friends, property crowdfunding usually refers to an online platform that secures money from multiple investors and then manages the property on their behalf. After the online platform generates enough money, it will then form a limited company, with investors given a share in the company representative of the cash they invested. As a way to buy property, crowdfunding can be an excellent tool with investors only needing to spend around £1,000 rather than the £30k you would usually need to buy affordable housing in the UK. Of course, the trade-off is that you will earn considerably less income than owning a single property. Pros
A more affordable way to own money generating property.
No need to worry about landlord duties like finding tenants and managing the property.
You can easily diversify your portfolio and ‘buy’ multiple properties.
Cons
You will be earning far less income than if you owned a single property, with profits shared amongst investors.
You have no control of how the property is managed and if it is kept or sold.
Will need to conduct your own due diligence as property crowdfunding can be risky with no track record to know what you’re getting yourself into.
9. Rent to Rent For investment ideas UK, rent to rent can be an effective and little-known strategy that can get on you on the property ladder without paying a huge price tag. Rent to rent is when an investor rents a property from a landlord and then rents it out to a tenant. The investor who rents out the property from the landlord has the responsibility of finding tenants, maintaining the property, and paying property bills, while the regular rental costs that the investor is required to pay will usually be discounted to allow them to make a profit. Pros
Quick to get started with and begin generating income.
Doesn’t require the purchase of a property.
Cons
The number of landlords who will agree to this arrangement is limited.
Limited returns compared to other property investment strategies.
No ability to make returns through capital growth.
10. Real Estate Investment Trusts The final house investment strategy in this property strategy guide is real estate investment trusts, which are quickly becoming incredibly popular amongst those looking for investment ideas UK. Real estate investment trusts, otherwise known as REITs, are companies that own, manage, and finance properties. Similar to mutual funds, REITs are publicly traded like stocks, allowing investors to buy shares in the company. Due to this, REITs are an incredibly liquid asset and are a fantastic tool for diversifying a property portfolio. Pros
A liquid asset so investors can quickly sell shares to earn money.
Allows investors to easily diversify their property portfolio.
Can earn regular income through dividends.
Cons
Low capital growth potential.
Fewer returns than traditional real estate investments.
Comments