Is Property the Best Way to Invest Money?

Why Invest in Property? 

Your first step in deciding if real estate investing is right for you is to think about exactly why people invest in property in 2021. 

Simply put, buying investment properties is an excellent, and (comparatively) safe way to invest your hard-earned cash. 

However, investing in the property market may not be right for everyone, with the effectiveness of an investment strategy depending on your goals. 

With this in mind, check out the pros and cons of property investment to see if it’s the right solution for you. 

For a full detailed look into why you should invest in property, be sure to check out our brand-new 2021 guide. 

Pros of Investing in Property  

• Rental income is Currently Higher Than it Has Ever Been – In fact, the HomeLet Rental Index found that the average monthly UK rental income was a record-high of £1,061 per month in September 2021. 
• Property is Safer than Stocks – Despite the Covid-19 pandemic, UK house prices have reached a record high, surpassing a £250k average value for the first time ever. In comparison, the stock market suffered its worst crash since 1987 as a result of lockdown. 
• Huge Rise in Prices Predicted – Savills’ optimistic property price predictions show a rise in UK prices of up to 18.8% by 2026, ideal for those looking to make a profit from selling their property. 
• Rental Demand is at a Record-High – A post from Buy Association in April 2021 reported that the average time it took to let a rental property was just 8.9 days, down from 31.9 days in 2019. This is the shortest amount of time ever recorded by estate agency Hamptons. This means there’s less chance of your property staying untenanted and not earning money.  
• Can Be Completely Hands-Off – While you can choose to self manage your buy to let investments and become a landlord, you can also consider hiring property management companies to handle all landlord responsibilities, such as collecting rent. Their services are available for a fee, usually around 10% of your monthly income. 

Cons of Investing in Property 

• Potential to Earn No Income During Void Periods – If you fail to find a tenant, your property could spend time earning no money while you will need to foot the bill for mortgage payments. This is why research is essential to identify residential property that will be popular amongst tenants.  
• Property Investment is a Long-Term Investment – Unlike stocks or cryptocurrency that can net you a quick profit, property is a long-term strategy. The most successful investors allow property prices to increase for many years before selling for a big cash payout. If you want quick returns, investing in property may not be the perfect strategy for you. 
• Buying Real Estate Can Be Expensive – While there are ways to reduce the upfront costs of property investment, the reality is it can be expensive, with our estimates suggesting you’ll need around £31k at a minimum to buy a £100k property, factoring in mortgage payments, stamp duty tax, and legal fees. 

How to Invest in Property UK? 

If regular rental income and the potential for capital growth have interested you, then this section is for you. 

Here, we will discuss the best property investment strategies in 2021, including real estate investment trusts and residential property. 

We’ll also be looking at ways to finance your real estate investments and the costs involved. 

Best Property Investment Strategies in 2021

While real estate investments are an excellent choice in 2021 and 2022, not all strategies are equal. 

Real estate is a diverse strategy with plenty of options to choose from.  

Currently, the most popular real estate investment strategies include: 

• Buy to Let Residential Property – The most basic form of buy to let, where an investor will buy a house and rent to a tenant for a profit. 
• Student Accommodation – An investor can purchase either a purpose-built student accommodation or an HMO and rent to a student tenant during the academic year. 
• Off-Plan Property – Landlords can purchase residential or student real estate that isn’t yet completed for a discounted fee.  
• Commercial Real Estate – Buying a property to rent to a business or corporation. 
• Real Estate Investment Trusts – A more niche strategy that involves investors buying a stake in a publicly-traded company that owns property on their behalf, where the money earned by the company is distributed to shareholders. 
• Buy to Sell – Another popular strategy, otherwise known as house flipping, is where an investor buys an undervalued property and adds renovation work or home improvements to increase its value. They will then sell the property as soon as possible for a profit. 

The suitability of these strategies for your needs will highly depend on your investment goals. 

To get a full breakdown of each of these strategies and a list of the pros and cons of investing, check out our 2021 guide to the best property investment strategies UK. 

How to Invest in Property With No Money UK? 

If you’re looking at real estate investments, you may be wondering how you can afford the venture. 

Property prices can be pricey, with the current UK average sitting at £264,244, according to the Land Registry. 

So, if you don’t have enough cash, what options do you have for investing in property? 

Well, you may need to opt for a buy to let mortgage, which differs from more traditional mortgages you may be familiar with. 

What Is a Buy to Let Mortgage and How Does it Work?

A buy to let mortgage is a mortgage that has been specifically designed for real estate investors. 

They work slightly differently from a traditional mortgage, with higher interest rates and a higher deposit – usually 25%, but can range between 20-40%. 

They’re also usually interest-only, which means you’ll only pay the interest each month without touching the overall debt. 

Following the end of your mortgage term, you’ll need to pay off the total capital debt – typically achieved by selling your properties or remortgaging. 

To learn more about BTL mortgages, check out our complete guide. 

How Much Money Do You Need for a Property Investment? 

So, how much capital do you actually need to pay for investment properties in the current UK market? 

The answer to this is slightly complicated, as the property’s value can depend on many factors. For starters, if you invest in student accommodation, you’ll pay a lot less than residential properties. 

It can also depend on where you buy. Due to large regional variation, the average property price can change heavily depending on your location.  

For example, the purchase price of a property in Manchester is around £500k cheaper than prices in London. 

It may also change if you’re a first-time buyer, with tax costs sometimes cheaper for those buying their first home. 

Regardless of these outliers, you’ll likely need around £31k to pay for a £100k property. This is factoring in expenses like a mortgage deposit, stamp duty, legal fees, land registry fee, and a cash buffer used to pay for any unexpected costs that arise. 

However, this only considers the upfront costs of property, with other ongoing expenses and exit costs including: 

• Ground rent 
• Mortgage interest payments 
• Property management companies fees 
• Maintenance costs 
• Landlord insurance 
• Capital gains tax 
• Estate agents fees 

To get a full breakdown of the costs involved in investing in properties, be sure to check out our full guide to how much money do you need to invest in property in the UK market. 

What If You Can’t Afford the Money Needed for an Investment? 

If you’re asking how to invest in property with no money in the UK, you may encounter some problems. 

Investing in properties can be expensive and time-consuming. You’ll need money to handle the upfront costs and upkeep of an investment. There are ways for investors to invest in property without paying the money required to purchase a buy to let investment. 

1. You can save up money and wait until you can afford a BTL property. 
2. You can invest alongside a business partner. 
3. You could rent out a room in your home and earn income. 
4. You can invest in a real estate investment trust/ REIT with fewer upfront costs or financial obligations. 

Just remember that this isn’t investment advice. If you’re looking for financial advice or guidance on your financial decisions, it’s vital you speak to a specialist advisor for help on investing in the housing market.

Best Places to Invest in Property UK 2021 

To make the best investments in the UK and generate the highest income possible, you’re going to need to do some research.  

The first step in this research is deciding on where to invest in property. As an investor, you’ll want to narrow down your search by considering some essential factors. These include finding an area with: 

• Affordable properties, ideally below the UK average of around £260k. 
• Strong capital growth potential for when you decide to sell the property. 
• High rental income and strong rental yields. 
• Good transport links and infrastructure for professionals. 
• High levels of regeneration, which is a good sign of a growing housing market. 

In this regard, we’ve done the hard work for you, as we’ve written a top 10 list of the best places to invest in buy to let property in 2021 and 2022. 

Our top recommendations at the moment are Liverpool, Manchester, Birmingham, Luton, and Wigan. 

This guide is also helpful if you want to make a balanced portfolio and invest in different hotspots – something that is ideal for investors looking to reduce the risk of investing in one area. 

You can find out more about these locations, their latest market data, and market predictions by clicking the links above. 

Alternatives to Investing in Property 

While we think buying a property is a good method for making money, we need to address other investments out there that may be more ideal for you. 

Depending on your funds, we have a perfect guide outlining your options at various price points. 

The guides include: 

• Best way to invest £50k 
• Best way to invest £100k 
• How to invest £500k 
• How to invest £1 million 

Strategies like buying premium bonds, investing in stocks, and cryptocurrency are all outlined here, so you can decide exactly what sort of business you’re looking to make.