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It can be overwhelming knowing where to begin with investing in property as a beginner, and one of the most overwhelming aspects of a real estate investment is knowing what type of property to invest in.
What type of property is an investment property, anyway? And what are the different types of property investments available to investors?
There are many different property types available for investors to invest in, and the property investment strategy you choose will depend on many factors. To decide which type of property is right for you, you need to think about:
In this guide, we’ll look at some of the most common types of property investment ventures in the UK and list some pros and cons.
We’ll also explore the average cost of each property type and the type of returns they can generate.
Keep reading to discover more.
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By submitting your details you agree to allow RWinvest to store and process the information submitted and receive product information and other communication, as stated in the privacy policy.
Residential buy-to-let is arguably the most common type of investment property. With many benefits behind it and a lot of opportunities to keep costs low, this type of rental property is a good option for a range of investors.
Residential buy-to-let is a property purchased by an investor and let out to tenants. It can come in the form of an apartment, house, or really any type of property that can be lived in long-term.
The returns offered by residential buy-to-let are:
The price of residential properties can vary depending on location and type (e.g. a studio flat is generally priced lower than a two-bedroom apartment).
As of June 2023, the average price of apartments in more affordable areas like Liverpool stands at £147,626, according to Zoopla.
According to the Land Registry House Price Index, the average property price in the UK in March 2023 stood at £285,000 (the latest data available). This is £11,000 higher than 12 months prior.
This shows that there are bargains to be found, depending on what kind of property you are looking for and where it is located. Residential buy-to-let is often one of the most affordable property investment types available.
Like residential buy-to-let, student buy-to-let is when an investor purchases a property with the plan to let it out to tenants.
The main difference between residential and student property investment is the group of people who rent the property, as student buy-to-let only accepts student tenants.
Therefore, student buy-to-let is often located in major cities or close to university campuses to help attract potential tenants. They may also be HMOs, which we explain further down in this guide.
Many students prefer modern new build properties, however, with studio apartments being popular.
Like residential buy-to-let, the returns that come with student investments are:
Due to student buy-to-let properties often being studio apartments, prices are generally low.
Manhattan studio apartments are also becoming a popular choice as a studio with a secluded bedroom giving tenants a mix between traditional studio flats and one-bedroom apartments.
With many new developers choosing to fit their projects with Manhattan studio apartments over traditional one-bedroom or studio flats, this trend is becoming one of the most popular property investment types in the UK.
In the past, we at RWinvest have sold student flats for less than £60k, such as with our City Point development which had units priced from only £59,995.
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You may or may not be familiar with off-plan property investment. If you’re not sure what the term means, it is basically a property that can be purchased before it is actually complete and ready to be lived in.
This is a very common type of investment property in the UK and one that many investors opt for. Take a look at the benefits below to see why.
Off-plan properties offer the same type of returns as typical residential/student buy-to-let:
With off-plan investments, capital growth can often be more impressive as the property’s value can increase before the development is fully complete.
At RWinvest, our off-plan properties are offered at up to 55% below market value. Prices start at just £164,950 for our exciting off-plan Liverpool property, Central Park.
Finding off-plan properties at lower prices than fully built properties is extremely common, making this an ideal type of investment property if you have a low budget.
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HMOs are Houses of Multiple Occupancy. This residential real estate venture involves purchasing a house with multiple rooms in it and renting out each room to a separate tenant.
This type of strategy is most commonly found as a student investment but can be let out to tenants of any target group.
HMOs generate returns through:
HMOs are commonly sold in property auctions, making them an affordable option for those looking to grow their investment portfolio.
An article from Property Reporter revealed that auction houses cost 40% less than the average property in the UK in 2020. Keep in mind that auction properties often require cash buyers, so you may need to have the full amount available upfront.
Not every investment property owner is interested in collecting rent and generating a monthly rental income, and that’s where buy-to-sell properties come in.
Buy-to-sell (also known as ‘flipping houses’) is a strategy in which an investor buys a property to sell it for a higher price. The property may need some renovation before it can go on the market, which allows the investor to purchase it for a low price.
Quite often this type of property investment will see properties being modernised or extended to increase their value, which can be a lot of work depending on how long is needed.
Buy-to-sell generates returns through just capital growth.
If the property appreciates in value by the time they come to sell it, thanks to renovations and the property market at the time, the investor makes a profit.
Like HMOs, buy-to-sell properties are often purchased at property auctions, making them potentially affordable.
However, you must remember that while the initial property price may be low, the cost of renovation can end up being high. A lot of the time, buying an off-plan buy-to-let property for a similar cost works out more affordable in the long run and with better returns.
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As the name suggests, holiday lets are properties that are let out to people on a short-term basis by providing a place for them to stay during a holiday or trip.
These properties can come in many forms and are often rented out during the peak travel seasons, such as in the summer. However, some city-centre properties may see high traffic all year round.
The returns that come with holiday lets are from:
There’s really no set cost for holiday lets, as any type of property can be let out on a short-term basis.
For example, for a property in a typical UK holiday location such as Cumbria, a caravan can cost as little as £37,995, while a 14-bedroom detached house costs almost £5 million based on current listings.
Commercial real estate properties are properties that are rented out to people running a business. Examples of what these properties can function as include office space, retail space, or warehouses.
Much like residential buy-to-let, commercial property investments can have long-term tenants that bring in regular rental income.
Commercial real estate can bring in returns through:
Commercial property is priced higher than your standard residential property. This is because commercial properties are often very large and can be rented out to multiple commercial tenants at once.
Based on current listings for commercial office spaces for sale in Manchester, investors can expect to pay between £400,000 – £3,500,000 depending on the building’s size, quality, and location.
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Ready to invest in property? At RWinvest, we have some of the UK’s most lucrative residential and student buy-to-let opportunities, with recent developments like the Rice Works offering high rental yields of up to 7%, amazing capital growth potential, and high tenant demand.
Chat to an agent today to find out how we can help you meet your financial goals with property investment.
To read more about the possible investment types you could consider for your property investment venture, be sure to read our guide to property investment strategies.
Here, we cover the options we’ve listed in our guide and reference alternative investment types like real estate investment trusts, hotel investments, and more.
Click to read our property investment strategies guide now.
John is a property writer here at RWinvest. With a close eye on property market news and updates, John writes detailed and informative articles on a range of topics that are helpful for anybody looking to invest in UK property.
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