Types of property investment in UK
In the UK property market there are many opportunities for property investment. Depending on the needs of the investor, property investment can be a short or long term endeavour used to generate income, add to a retirement fund or can deliver capital growth as the property’s value appreciates.
1. Buy-to-let (Residential)
Buy-to-let describes the process of buying a residential property with the intent to then let it to residential tenants. Buy-to-let investments can generate short term rental income, providing the revenue covers any mortgage payments and other costs, such as general maintenance. These investments can also return mid to long term profits through capital growth, providing the value of the property appreciates. There are a number of considerations for when looking at buy-to-let as an investment opportunity:
- Mortgage: Buy-to-let mortgages usually have higher interest rates and require larger deposits than residential mortgages. For foreigners, expect margin of financing from 50% to 70% and there is a strict requirement on stable employment income with a minimum loan amount of generally of GBP200,000 and above.
- Area: Areas command different rental yields and capital growth. Investors may choose to focus on an area where property prices are rising but rents remain steady, or vice versa.
- Condition: Investors can potentially increase the value of their asset through renovation and conversion, but some investors will want a property that is ready to rent immediately.
- Landlord responsibilities: When becoming a landlord, it is important to understand your rights and responsibilities
As well as the costs of a buy-to-let mortgage, there are other factors for investors to consider when making their financial plans. The properties will require upkeep and budgets should anticipate void rental periods. If you are considering a buy-to-let investment we are here to help.
2. Commercial property investment
There are investment opportunities in commercial property, which can be broadly split into the following categories:
- Retail: Supermarkets, high street shops, shopping centres, retail warehouses
- Leisure and restaurants: Restaurants, hotels, casinos, cinemas, leisure and fitness centres
- Office: Offices and office parks, mixed use and multi-tenant buildings, serviced office
- Industrial: Warehouses, sheds, storage yards, industrial, manufacturing or logistic units
- Hotel: Resort Hotels, Boutique Hotels, Business Class Hotels
As with buy-to-let property investments, understanding local demand will help investors make a more informed decision regarding the investment’s potential. Some of this investment may offer you a fully managed with fixed returns, exit strategy or profit sharing and it is important to understand what you are getting into
3. Student Accomodations
There are investment opportunities in student property, due to the following:
- UK has a high demand for quality educations
- The accommodations are for long term and very targeted
- The accommodations are usually located close to the proximity of colleges and universities
- Rentals are assured with parental guarantees
- Units are usually centrally managed
- Students growth are growing as education is one of the major attractions to foreigners
Some of this investment may offer you a fully managed with fixed returns, exit strategy or profit sharing and it is important to understand what you are getting into
4. Buying off plan and buying off market
Buying off plan describes the action of buying a property before the development is complete, and in some cases it may not have even been started.
There are two completion dates to be aware of when buying off plan: the short stop, when the developer expects the property to be finished; and the long stop, when the property must be finished.
Advantages of buying off plan include:
- Deposits for unfinished new builds may be cheaper than those on completed properties
- You can often influence design features, fixtures and fittings
- Purchasing the property at a fixed price before completion means you can benefit from inflation on 100% of the property’s capital value
In some cases, you may choose to sell on the purchase before it has reached completion; this process is known as flipping contracts. In order for this to be done the contract must be assignable, we recommend that you check this prior to proceeding with a purchase of this nature.
Off market buying refers to private sales that are not advertised online or in marketing materials – either through an agent or directly with the property owner.
If you are interested in finding out more about buying off plan, or would like to find out about any off market opportunities, contact us