There is a lot of concern amongst the property investment community in the UK at the moment about the outcome of Brexit and the impact it will have on the property market. Although the impact of UK-EU separation on property investment UK can’t be predicted accurately, the sector may regain the lost ground keeping in mind its history of resilient performance during crisis. As and when the UK property market bounces back, adopting the right strategy should see you through and meet the purpose of property investment UK.
However, there is no ‘one size fits all’ approach to property investing strategies and it depends on a number of factors such as your own personal financial situation, investment horizons, risk attitude, goals, availability of time, skills, experience, credit rating, and the choice of short or long terms gains, among many others.
Following are some of the property investment UK strategies you may consider to turn your property investment venture into a success and secure a high ROI.
- ‘Vanilla’ single occupancy buy to let
This is the simplest form of buy to let which ensures a sustained cash flow or yield over the long term. It is a proven way of buy to let which involves buying common houses. They involve lower rents but ensure a sustained inflow of income due to the affordability factor. Mortgage on this low-risk category is available most easily and this type of property investment is easy to manage, as well. A comparatively lower investment allows you to build up a portfolio of properties in a short span of time, benefit from the cumulative cash flow, and protect your money from low interest rates and inflation. Terraced houses, especially of the Victorian and Edwardian era are the most popular, however semi-detached, detached houses and bungalows are also common. Flats tend to be in purpose-built blocks or converted houses.
- Houses of Multiple Occupations or HMOs
This type of residential property involves letting out individual rooms to separate tenants as against renting out the house or flat to one family tenant. Houses of Multiple Occupations, also known as multi-lets, raise the cash flow or rental yield as you let individual rooms to separate tenants. Your overall income depends on the number of rooms you let to individual tenants. These properties include common areas which are shared by more than one household.
- But to sell
The buy to sell category involves buying a property, renovating or refurbishing it, and then selling it off at higher prices. This is a form of trading and those involved in it are called traders instead of investors. This strategy is useful if you are looking for larger returns over a shorter period of time. However, for the first timers, the viability of this strategy depends on market conditions, whereas professionals can apply this strategy through the entire cycle.
Leasing a property is a great option for those who have not saved for a hefty deposit. This allows for a way to generate significant cash flow even if you do not buy the property. Under this category, you secure an option to purchase but not the obligation to buy a property. This gives the buyer the certainty of a pre-agreed purchase price. The investor takes control of the property through a method which excludes all other potential buyers.
- Delayed completions or Instalment contracts
Under delayed completions or Instalment contracts, the seller agrees a sale price for a property with a buyer. When contracts are exchanged, the buyer typically pays an agreed deposit. However, unlike a normal house sale, completion of the contract is delayed for a few years. The buyer pays an upfront in order to have the right to buy a property in the future. The price is agreed on the current value of a property and not at the rate prevailing at the time of sale completion. The buyer may take over paying the mortgage and building insurance costs and agree to pay for any repairs to the property. However, the mortgage stays in the name of seller until the sale completes. The seller usually moves out and the buyer may either move in or rent the property to a tenant.
- Commercial to residential conversions
This type of investment allows for a ‘change of use’ of the property. A commercial property is converted for residential use which can then be used for either renting out the property or selling/flipping for a more immediate profit. Earlier a prerogative of seasoned developers, the option is now open to other types of investors. The popularity of this option has increased dramatically since the introduction of the General Permitted Development Order (GPDO) in 2015.
- Joint ventures
Under property joint ventures, two or more parties combine their resources or skills and collaborate on a project on property. All the parties to the JV contribute something different to the project which includes capital, skills, knowledge, contacts or resources. A big advantage of joint venture is that different parties to the project benefit from the resources or skills of the other partners involved in the project as any single party may not have all the resources or skills needed to implement a project. The ownership is shared with a deed of trust protecting both parties interest. So, a project is executed, a profit is made, and that profit is split in pre-agreed shares.
- Deal packaging
This type of investment involves a deal which is sold to someone for a fee. This is also known as wholesaling or property facing where you sell the lead using assignable contracts, sub-sales & option agreements. Client facing is where the clients pay you more to manage the process (purchasing, legals, refurb) and assist them building up their portfolios. The kind of deals that are sourced by deal packagers are Rent to Rent, Below Market Value and Lease Option properties and the fee usually varies according to the length of the term. The advantage of deal packaging is that it does not require lot of finances to get started and you can generate good amounts of money by applying skills, knowledge and experience.
Therefore, you can make a fortune out of your property investment by adopting the right investment strategy according to your unique circumstances.
This article is for information purposes only.
Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.
There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.