Key Highlights

Investing in UK property, particularly residential property, can be a lucrative investment if done correctly. A lot of things do have the potential to go wrong, however, unless due diligence and best practices are adhered to. One of the most common and successful ways to invest in property is to purchase residential properties to let it out to renters – either long-term or short-term. However, there are other ways to invest in property, including both directly and indirectly.

If investing in UK property is something that appeals to you, then the first key steps are to do meticulous research, assess finances, and follow the advice and steps to the letter. Read on in this UK property investment guide to find more on how to start this journey.

Why Should You Invest In Residential Property In The UK

Purchasing a buy-to-let property in the UK has become one of the most popular ways to help investors accumulate wealth and develop a diverse portfolio that can withstand risk.

So, why should you invest in property in the UK?

• Strong Long-term And Short-term Returns: The UK has been popular with property investors, both at home and overseas, due to its generally high returns on both a short and long-term basis.
• Capital Appreciation: The UK housing market, bar some setbacks in recent years, continues to grow and grow. House prices have experienced exponential growth in just a couple of decades, with UK prices having more than trebled since the beginning of the century. Research from Halifax has revealed that the average UK home has grown by an unbelievable 207% in the past two decades, with London prices growing by 239%.
• Stability: The UK has long been considered highly stable, both politically and socially. It is a country that is unlikely to see combat, political turmoil, or significant environmental damage in the future. Its stock market is also considered fairly stable and strong.

In the argument between commercial property and residential property and which one is better truthfully there is no answer. Commercial property investment can potentially offer stronger profits, especially when it comes to rental yields, but it comes with its caveats. Namely, it can be more expensive to invest in from the get-go and requires more expertise. 

Residential investment properties are sometimes seen as an easier entry point for those just starting their career. Generally, residential investments have lower initial costs and fewer risks. By and large, the majority of new investors would benefit from residential as opposed to commercial, but this is entirely dependent on the individual’s business goals and situation.

How To Invest In Residential Property In The UK

Before beginning your investment journey, you need to decide what method of property investment will work best for you and your goals. These include:

• ​​Buy-to-let: As straightforward as it sounds, this means purchasing a pre-built property or property that is in the development or planning stage and renting it out. Purchasing a property that has not yet been completed can often appreciate in value, meaning it is worth more by the time of completion. Investors can choose to sell at this point or opt to rent it to tenants.
• Buy-to-sell: This refers to buying a property and then waiting until it appreciates in value before selling it, netting a profit.
• Buy-to-renovate-then-sell: Purchasing a property that needs update or repair before selling it for a profit. This method is more time-intensive and requires a lot of upfront costs, so it might be best avoided for new investors. This is often a preferred method for those who have skills in building and renovation and can do a lot of the work themselves and save money that way. This also refers to property development, i.e., where you develop a property to make a profit.
• Real estate investment trusts and other property investment funds: This is a great option for those who cannot afford a deposit or upfront cost for a property. This method refers to investing in a property or the shares of property-related companies. Investors can choose to invest in their home countries or choose funds that invest overseas or in property company shares. This is often targeted towards commercial property rather than residential, however.

For the majority of investors, one of the most financially beneficial; and successful ways is purchasing buy-to-let properties, either pre-built or ones in development. 

Research

Investment, even property, takes a lot of research for it to be a successful endeavour. Potential investors should be wise with their money. 

Key areas of research include:

• Location: Where you decide to invest in property defines everything, from rental yields to the chance of capital appreciation, and even the tenant demand and quality of your tenants. Meticulous research should be done, especially if you’re investing from overseas and don’t know parts of the UK that well. The location chosen should have high tenant demand, low buying demand, and strong rental yields. You should think like a tenant and consider surrounding amenities, transport links, schools and more – after all, you want the property to attract tenants. Don’t forget to compare property prices in different locations in a particular city or town to find the best deals.
• Growing Areas: Stemming on from location, you should look for “growing areas” – areas that are seeing unprecedented growth in the housing market, as this can spell good fortune for capital appreciation.
• Demographics: Who do you want to rent to? Who you rent to is important when it comes to whether you rent out your property on a short or long-term basis and where you purchase a property. Thinking of renting to students? Then you need to purchase a house that can be turned into one of multiple occupations that is in a university town or city. Renter demographics is an important research step.
• Market Research: understanding the UK property market and your chosen location’s market is crucial to ensuring that your investment is successful. Just because a location is popular with buyers doesn’t necessarily mean it is popular with tenants. Market research will help you understand a location and the property investment scene much better, helping you guide your decision. Market research can cover potential capital growth, average rental yields, external factors, and more.

Consider Your Finance Options

When it comes to investing in residential property in the UK, investors can take several routes. For a lot of first-time investors, especially those based in the UK, the general financing route is to use a buy-to-let mortgage. It is important to factor in exactly how much finance is available to you, from liquid cash and savings and stocks to potential loans.

Other ways to finance your investment include:

• Home equity loans
• Mortgages
• Private loans from friends or family
• Bank loans
• Cash
• Personal savings, such as money from savings accounts, ISAs, shares, bonds, and premium bonds.

Investors should always calculate their income and potential expenditure to find out if their investment will be profitable. It is important to factor in a shortfall in case of an emergency. Investors should calculate potential income and outcome per month to see what is feasible. New investors should look at guides and tips on how to write a budget and stick to it.

Investors should also compare mortgage deals. Once they have decided to finance the property via a mortgage and have calculated how much of a deposit they will need, investors can begin to shop around to find the deal that works best for them. Mortgage comparison sites are great for helping with this.

To get a buy-to-let mortgage, banks and lenders need to know what the rental income of the property will be and if it will be enough to cover the mortgage and its interest payments. This is where prior research is critical. This generally needs to be between 125% and 145%. To ensure that this is met, investors should have worked out what a feasible asking rent for the property is and for that particular area.

Seek Advice

There are a lot of communities and even businesses that you can turn to for advice when needed. From an investment property agency to financial advisors to landlord subforums, potential investors can get a wealth of opinions and advice that can help guide their judgement. Getting outside opinions, especially from those who have a better understanding of the market than you, is critical in making a more informed and well-researched decision. 

Use A Property Investment Agency

One of the best ways to invest in residential property in the UK is to use the expertise and guidance a property investment agency can offer. A UK property agency can be extremely beneficial in helping you locate opportunities and invest in them – even for investors who are investing in the UK from abroad.

They can help you to manage your rental properties, taking care through the entire lifecycle of your investment. They can locate properties, handle transactions, orchestrate viewings, and manage lettings and tenants. These agencies also have a wealth of experience and knowledge and can help guide your decisions and judgement. 

Property investment agencies often use or work closely with a property development agency. This means that investment agencies have exclusive deals with properties scheduled for completion and can often source cheaper deals for investors.

Summary

Investing in UK residential property is a fantastic way to build wealth, and achieve either short or long-term goals. The UK holds timeless appeal for investors thanks to its wealth, economy, demographics, growth, political stability, and more. It is home to millions of people, mostly concentrating in cities that are currently seeing unprecedented growth. As such, this enigmatic island should be at the top of the list for any investor.

For property investors looking to branch out into the UK buy-to-let market, the best way to start is to get quality advice from a property investment agency. North Property Group is a property investment agency and lettings agency with a focus on premium UK real estate. We secure deals with high-scale developers to deliver the best off-plan developments to investors. Book a free consultation with us today to start your journey in investing in UK property development.