Key Highlights

Many investors choose to invest in the UK due to its strong rental market, growing population and economy, political stability, and breadth of options. A country that is constantly in stages of redevelopment, thousands of new residential spaces are appearing across the country – presenting countless opportunities for investors looking to either expand their UK portfolio or invest in UK property for the first time.

The UK has long since been an attractive place for investors, as it has a strong market, ensuring positive rental income and capital growth. While it is a relatively small country, it is highly diverse with a range of different and eclectic cities, ensuring a strong and varied portfolio. Property laws are also straightforward and easy to navigate – especially when investors opt to work closely with property investing companies who are specialised in the field.

However, investing in property can be stressful, take time, and have a lot of factors investors need to consider. Here are a few things to keep in mind before making your next or even first investment decision:

Location

The location of your chosen property is everything to securing sure fire returns on your investment. Making strategic choices on where you choose to invest can make a huge impact on your rental yields and returns. 

Key factors to consider when choosing your next investment hotspot is: 

1. Is there a high influx of population? Your chosen area should have continuous population growth to ensure that there is sufficient demand.
2. What are market trends like for your area? Does the population trend increase? What is the demand like for housing – is it a demand for rentals or for purchases? What is the job and financial market like? These questions need to be asked to make an assessment as to whether the location in mind is a financially viable one.
3. Industries: Does the location have a large job market, with plenty of industries and companies flourishing? People are attracted to areas that have high job growth and opportunity, so opting for areas like this can bring large investment returns by renting to young professionals.
4. Education: Is it a university city? Thousands of students start their higher education each year all over the country, an important aspect to consider if you’re choosing to rent to students. It is also important to research retention rates – i.e., do the students opt to stay behind to live and work after their studies are over?
5. And finally, does the city have a lot to offer and pull in a lot of tourists? For those looking to use their property for short term lets, purchasing property in a place with a high volume of travellers and tourists is key. Examples of this would be prime tourist hotspots such as London, Manchester, and Liverpool, which all have their own unique pull.

As a general rule of thumb, it is best to go for cities rather than villages and towns, where demand for rental properties are usually high and the population is on a steady incline. Popular spots to invest in the UK include cities like London, Manchester, Leeds, Liverpool, and Birmingham, though population and market trends suggest that places like Didsbury, Brighton, and others are also cities with bright prospects and can be taken advantage of early.

Market Trends

Property investors should closely follow current market trends – they’re trends for a reason. Market trends can include everything from the current demand for rentals in an area, current property prices including average nation property price and the average property price of the specific area they are looking to purchase a property in. Demand for chosen countries and areas should be high, as investing in an area that has a low demand for rentals will only result in lower rental rates and poor investment returns.

A market’s overall health is something to consider, as investors should look to invest in countries that have an overall strong economy. The UK has boasted a strong real estate market, which is predicted to grow from £280.26 billion to £370.67 billion by 2028; these figures highlight an incredible CAGR of 5.75 from 2023 to 2028.

Investment Strategy

Before you purchase a property, you need to decide exactly how you’re going to go about it and how you want to make money from it. There’s a variety of ways investors can make profit from their assets, both short and long term.

There are a few ways investors can make a profit after purchasing a property:

• Buy-to-let (long term): Perhaps one of the most popular methods of creating a viable investment, investors can either buy recently developed property or older property, have it renovated, and let out to long term renters.
• Buy-to-let (short term): For those looking to cater to the traveller/tourist crowd, buying to let out property on a short-term basis is the way to go. Short term lets cater for guests staying for 30 days or less. These properties are often listed on short term rental sites such as Airbnb, Booking.com, and VRBO.
• Buy and sell: Like it says on the tin, investors purchase ready-built properties and sell them for a profit, often waiting an indeterminate amount of time so the property price increases. This is often done in markets where there is a high buying demand.
• Buy, renovate, and sell: Some investors choose to purchase homes that are either derelict or in disrepair, making renovations, then selling for a profit. Some who choose to do this might be skilled in repairs in their own right, often opting to do the repairs themselves to save on labour costs and maximise profits. However, not every investor is capable of doing this; if you’ve never completed renovations before then it is advised to forego buying a property with serious damage and extensive repairs needed, as this will result in much higher costs and a longer time to fix.

Financing Your Property

If it’s your first time investing in real estate, there are a few things that you need to consider when it comes to financing. For some investors, they can use funding from personal savings and mortgages, or opt for loans and partnerships in order to purchase the property.  It should also be kept in mind that buy-to-let mortgages often require a larger deposit than regular mortgages, with investors often needing to put down between 20% and 45% of the property’s value. 

Whatever the method, it is important to consider what your financing options are. Investors can look at a range of options and choose based on factors such as interest rates, repayment plans, and terms and conditions to find a financing option that works for them.

For more information on mortgages and how much you could borrow, check out our mortgage calculator here.

Rental Yields

Investors should look to developments and areas that have good capital appreciation whilst achieving strong rental yields. Rental yield is the yearly amount an investor can expect to receive in rent as a proportion of property’s market value. 

After all additional costs have been factored in, investors should look for rental yields between 5% to 8% which is generally considered optimal. Investors should look to buy properties if it can produce a rental yield of at least 5%, meaning that it will deliver a return of 5% of property value in rental income, after expenses, each year. To be able to calculate this effectively, investors should research the property’s value, the annual rental income the property can feasibly receive, and any annual costs that stem from interest rates, letting agency fees, and any other landlord fees and costs.

Summary

Here at North Property Group, our experienced team can help you find the best investment opportunities in all these cities and more. We have a deep and rich understanding of the UK’s property market and can offer expert guidance so you can make the most out of your investment. Call us today to unlock the investment potential in the UK.