Property Investment Basics

Property investment may be a good path for you if you’re looking for a lower-risk, high-reward investment strategy.

If you’re looking towards long-term financial security, investing in buy-to-let properties, in particular, can offer many investors the chance to grow their money much more than they could with cash alone or through alternative investment methods.

However, there is no such thing as a completely risk-free investment. So, if you’re considering investing in property, it’s important to weigh the pros and cons and conduct thorough research to ensure you’re making an informed decision.

As with any venture, investing in property is not without risk.

Understanding the risks of property investment and taking steps to mitigate them can reduce the chances of losing money on your investment.

Some of these risks can include:

• Market volatility
• Rental market changes
• Economic conditions
• Long-Term commitment
• Lack of liquidity
• Costs
• Tenant problems

Learn more about these risks and how to mitigate them when investing in property.

Given that you invest in property to make the most of its potential for returns, you will naturally want to know how long it will take before you start to see income appearing in your bank account.

There is no simple answer that fits all properties, however, and so the question of how quickly it will take to see returns from property investment depends on what kind of property you are investing in. For instance, if you invest in a property which is already tenanted, you would start seeing returns instantly from your monthly rental payments.

You typically won’t see returns from rental income until tenants have signed a contract to live in your property. With this in mind, you’ll want void periods where no tenants are living in your property to be as short as possible.

With so many different investment strategies out there to consider, many investors are weighing up the information to decide if property is a good investment in the current climate.

With the many benefits on offer compared with a limited number of downsides, property is definitely a good investment for anyone. Here are a few of the reasons why it has become such a popular investment class, and why it is appealing for a wide range of investors.

One of the most exciting new forms of property investment right now is serviced accommodation, and for good reason.

Serviced accommodation refers to fully-furnished properties that are rented out to guests while providing services you might expect from a hotel. For this reason, they’ve also been called ‘aparthotels’.

Unlike traditional buy-to-let properties where tenants will usually sign contracts for anywhere between 6-12 months at a time, serviced accommodations will see the guests decide how long they want to stay, usually for a much shorter amount of time.

Off-market property offers an intriguing option for investors looking to invest in the property market, but it can be exclusive and somewhat confusing for newcomers to understand.

While it is a similar term to off-plan property, they refer to very different kinds of properties.

If a property is described as being off-market, it is not being offered or listed on the open market for potential buyers, with the deal and transaction happening behind closed doors.

You won’t find it on property portals or being advertised by estate agents, with the seller instead working through alternative channels to sell their property. Because of this, off-market is often considered a secret property market.

Student property is one of the most popular ways of investing in buy-to-let property in the UK thanks to the affordable entry points, the consistently high demand and the lack of void periods.

When looking to invest, finding the best place to invest in student property is obviously important, as you will want to give yourself the best chance of high returns possible.

Several major cities around the UK stand out as some of the best places to invest in student property. We feel that recommending only one city would not be the best answer, so we’ve provided some recommendations based on key criteria investors should look for in a student investment property.

One of the main questions we get from potential investors is where is the best place to invest in UK property, and it’s one we answer constantly.

No two cities or towns have the same property market, and property investors should look for these three main qualities in a city they want to invest in:

• Affordability – You don’t want to be paying too much for an investment property, as this will typically lower your rental yield.
• High rental demand – Areas with high demand from tenants will not only see growth in rent but also have a lower chance of void periods.
• Price growth – Areas with higher-than-average house price growth are desirable as it means investors will benefit more from capital appreciation.

Based on these qualities, we’ve selected two UK cities that we feel are the best to invest in in the UK.

Off-plan property is a term that you’ll see a lot on our website, but it can be unclear what this term means.

Simply put, investing in off-plan property means buying a property that is still in the planning or construction phases. This means you will be waiting for it to be completed and ready for tenants before you can start earning rental income from it.

This is different to traditional buy-to-let investing, where you buy an already-complete property and can start collecting rental income as soon as it is tenanted.

One of the first questions that property investors need to ask themselves is what kind of property do they want to invest in. For most investors, there are two main routes they can choose to go down.

• Student property – Renting out properties for students to live in during their university studies.
• Residential property – Renting out property to standard tenants to live in full-time.

Both options are perfectly valid investment strategies capable of bringing strong returns, and both have their own pros and cons to consider.

Capital appreciation refers to how properties rise in value over time. This is an important aspect of buy-to-let property investment, as by benefiting from capital appreciation, investors can make a massive return when they sell their investment property.

Also known as capital growth, capital appreciation is one of the unique benefits of property investment. Alongside rental income, it is one of the two ways investors will see returns on their investment, but this is far more of a long-term strategy.

Rental yields are a way for buy-to-let investors to calculate what kind of return they will make every year in rental income.

This is represented by a percentage value of their initial investment.

Rental yield is calculated by taking the price that they bought the property for, dividing it by the annual rent and then multiplying the result by 100.

For example, if an investor bought a property for £200,000 and expected to make £800 a month from it in rent, then they would have a rental yield of 4.8%.

Property, as with any investment venture, comes with a level of risk.

But this doesn’t mean you should shy away from investing in property in 2024.

Some key things to understand are price fluctuations and rental market changes.

When you invest in property, you’ll buy your property at a specific price with the intention of being able to sell it for a more considerable amount at a later point. This allows you to make capital growth returns on your investment.

If property prices fluctuate negatively and your property drops in value, it may be challenging to sell it for more than you purchased it for. Similarly, changes in the rental market can massively affect rental returns.

In the same way that property prices can drop, average rental costs can also decrease if an area is suddenly less desirable to live in and therefore sees lower rates of rental demand.
While 2023 has seen some challenges, such as rising mortgage rates and falling prices, the market is expected to improve in the next couple of years. In fact, some areas could see capital growth of up to 11.7% in the next five years.

This is an excellent opportunity for buyers to get started in UK property investment while prices are still relatively low. However, it’s important to remember that property investment is a long-term strategy. Don’t expect to get rich quick. But if you’re patient and play your cards right, you could make some attractive yields in the future.

Buy-to-let refers to buying property so you can make money from it by renting it out to tenants.

This is a wide-ranging term that refers to any kind of property being sold for the express purpose of being rented, as well as anyone looking to buy a property so they can become a landlord.

You may also see buy-to-let being referred to as buy-to-rent, but in essence, both terms have the same definition.