Property Investment Tips: Top 25 Tips Every Investor Should Know

What Is Property Investment?

Property investment is, by definition, the act of buying a property to make a profit. This profit could come from rental income, capital gains from the sale of the property, or both.

What Is an Investment Property?

So what is an investment property? An investment property is a property that is purchased to generate a return on investment.

An investment property comes in the form of an apartment, house, commercial office, or really, any kind of property that can be let out or sold for profit.

What Is a Property Investor?

A property investor is somebody who purchases one or several properties to rent them out or sell them for a higher cost. A property investor can be a single investor or a group of investors buying investment properties together.

How Do I Buy an Investment Property?

If you want to purchase a buy-to-let investment property, you can do this in different ways.

You could either buy a property with the help of a property investment company or invest privately by purchasing a property in an auction or via a real estate portal.

Before you consider how to buy an investment property, you need to learn about everything involved with property investment, including the costs, responsibilities, and how to make sure your investment is successful.

Luckily, if you continue reading our property investment tips guide, you’ll learn about all of the essential information you should know.

What Is a Property Investment Company?

What is a property investment company, you ask? A property investment company is a company that works with property developers and connects investors with the best property investment opportunities.

Essentially, property investment companies are there to help property investors find the lucrative, well-located properties they’re looking for. And often, these properties come with a below-market value price tag.

Why Invest in Property?

You may be familiar with property investment tips that tell you how to get into property and start investing, but what about why you should invest?

There are so many benefits to property investment, including the ability to:

• Make passive income.
• Meet financial goals such as early retirement.
• Gain better financial freedom and stability.

If you’ve spent time reading up on property investment tips and are now looking for information in property investment guides like ours, you will likely have come across the term ‘lucrative investment’.

And, of course, every investor wants their property venture to be lucrative.

But you might be wondering:

What makes an investment in property profitable? Can’t you just buy the first property you like the look of and expect the high returns to follow?

There are four main pieces of property investment advice that you need to keep in mind if you want to ensure your venture will succeed.

Get the Highest Rental Yields

Rental yields separate a good buy to let investment from a bad one.

Without high enough rental yields, you won’t make rental returns that are significant enough to give you an attractive income while covering fees such as mortgage payments and rental income taxes.

So what is a rental yield exactly?

The simplest way to describe a rental yield is as a percentage figure that property investors use to determine the profitability of a buy-to-let investment.

A good property investment rental yield would usually be anything above 5-6%, with yields of 8% or over considered highly lucrative.

Under no circumstances should you invest in a property without researching its assured or projected rental yield.

Care About Capital Growth

Capital growth in property investment is the term used to describe an increase in the value of a property over time.

Over the years, property prices will typically grow in value. In some cases, this growth can be higher than usual due to various factors.

Regeneration and market demand are two of the most common reasons for capital growth. That’s why so many people invest in Manchester, with Manchester property investment offering great capital growth returns due to ongoing regeneration.

Be sure to pay close attention to capital growth potential when looking for your property investment opportunity.

Pay Attention to Rental Demand

For a property investment venture to work, high rates of rental demand are needed.

After all, having a continuous stream of reliable tenants is necessary to get income on a rental home.

Some areas may experience more rental demand than others, particularly tenant groups like students and young professionals.

That’s why, if you’re looking to target these tenant groups, you need to know about the areas and the types of property that typically see high tenant interest.

If you’re interested in a buy-to-let investment strategy, thinking about tenant demand is crucial.

Know the Right Time to Buy

Timing is everything when it comes to property investment. The perfect time to buy an investment property is when the market performs well.

So what does this mean?

If you’re buying an investment property, you’ll want to do so when:

• House prices are relatively low, bringing some affordable investment opportunities.
• Property prices are expected to rise in the coming years.
• The rental market is strong, with a lot of demand for rental accommodation.
• Right now, UK property prices are increasing massively, making now the perfect time to get started with an investment.

The two main types of investment strategy – buy to let and buy to sell – tend to offer the best returns and are an all-around favoured choice for investors.

But how do the two strategies compare? What are their pros and cons? And which is the better choice for property investment?

What Is Buy-to-Let?

Buy to let is when an investor buys a property to rent out to earn rental income.

Pros of Buy to Let

• It’s a great way to make large amounts of money over time.
• The rental market is thriving, which means there are fantastic property investment opportunities available for those looking to make a buy-to-let purchase.
• You can make two types of rental returns through rental income and capital growth, making buy to let one of the best property investment options for profitability.

Cons of Buy to Let

• You rely on rental income to make a regular profit, so if you suffer void periods without any tenants, you’ll lose money.
• If you don’t choose a hands-off strategy (more on this later), managing a buy to let property can be a lot of hassle.

What Is Buy to Sell?

Buy to sell, or ‘flipping property’, is a property investment strategy involving purchasing and selling a property for profit. This is also often known as ‘property development’.

Pros of Buy to Sell

• The returns from buy-to-sell strategies can be significant when done right.
• Buy to sell is a good strategy for property investors who want to see their total return on investment over a more short-term period.

Cons of Buy to Sell

• Property investors who choose solely buy to sell as their strategy are limited as they won’t benefit from rental returns on top of capital growth.
• The type of property you buy and the specific area can impact the success of a buy-to-sell venture. If poorly done and without research, returns can be minimal.
• Buy-to-sell strategies are a lot more time-consuming than a hands-off buy-to-let investment.

Alongside thinking about the type of property investment strategy you’re interested in pursuing, you should also decide on the type of property you want to invest in.

By ‘type of property’, we don’t just mean whether you should invest in a house vs an apartment.

You should think about whether an off-plan, new build, or refurbished property is right for you.

Unsure what these terms mean?

Keep reading as we explore each of these options in the fifth instalment of our property investment tips.

Off-Plan Property

You may be familiar with the term off-plan property. If not, it’s time to familiarise yourself.

Off-plan properties haven’t yet been built but are available to buy. This means they may still be in the planning or construction stages.

Off-plan property investment is incredibly popular as it offers a range of benefits, and exploring off-plan investments is a key property investment tip.

So what are these benefits?

As developers often list off-plan properties at below-market value rates, you can save money.

You’ll attract tenants due to people being more drawn to brand-new properties.

You could maximise capital growth returns. This is because by the time your property is complete, it’s likely it could be worth more than the price you initially paid.

Now, let’s look at the downsides.

One of the things some people dislike about off-plan property investment is the fact that you can’t view the property before you buy it.

This puts many people off from buying off-plan, but it’s important to know that many off-plan properties are available to view through a virtual reality tour.

With virtual reality tours, you can see what an off-plan property is expected to look like once completed and can even take a tour of the surrounding area from the comfort of your home.

New-Build Property

New-build properties are very similar to off-plan properties, with the main difference being that they’re already completed.

Generally, a new build home is a property completed within the last few years.

Unlike off-plan properties, new builds will have likely been lived in by tenants. Potential buyers can also view them since they are ready and completed at the time of purchase.

Here are some benefits of buying a new build for your investment:

• New-build properties aren’t likely to have been tenanted many times. This is appealing to tenants who want to feel like they’re one of the first people to live in a property.
• New builds are more eco-friendly than older properties, attracting more tenant demand, especially from young professional groups.

The only real downside to buying a new build property is that some tenants may prefer a more classic property style, such as a period home.

By researching your target tenant, you can make sure you’re investing in a type of property that your target tenant group will be most interested in.

Refurbished Property

A refurbished property is a property that has been purchased and renovated to look more modern.

This often includes period properties that need to be updated without losing their original period features.

Investors more drawn to the renovation side of property investment will favour this type of property.

And there are benefits:

• Some tenant groups prefer properties to have ‘character’, and renovating a period property is an excellent way to factor this into a rental home.
• If a property needs a lot of work, it will often be cheaper to buy.

However, investors who aren’t prepared to put time and money into renovating a property should opt for a new build or off-plan property for their investment.

Another crucial factor when trying to find out “how to invest in property?” is identifying your target tenant.

Identifying the best investment property for your target tenant helps you discover the best properties to invest in and can help you get one step closer to a successful investment.

By deciding who your ideal tenant is and what they’re looking for, you can purchase a property that appeals to them.

Renting to Students

Renting to student tenants is popular in the UK, particularly in key university cities.

Students make great tenants due to the high demand for student accommodation in the UK.

But that’s not all.

Because most students tend to be respectful of their landlords, they’re often more likely to pay rent on time to keep their accommodation and avoid any issues.

How Can I Make My Property Appeal to Students?

• Invest in a property close to university campuses, bars and restaurants, transport links, and shops.
• Ensure your property has a fast internet connection, space for a desk area, and storage options.
• Include white goods and furnishings in your property.
• Choose a property that offers communal areas for socialising.

Renting to Young Professionals

Most residential buy-to-let property investment opportunities are targeted at young professional tenants.

This is because the rental market in the UK is primarily dominated by young people living and working in UK cities.

This tenant group may not yet be ready to join the property ladder and buy a house of their own to become homeowners.

Also, despite Government schemes like Help to Buy, young people struggle to afford homes due to rising house prices.

Either way, the UK’s high number of young professional renters has massively contributed to high tenant demand rates.

How Can I Make My Property Appeal to Young Professionals?

• Choose city centre flats in locations or areas with good transport links and local amenities.
• Fit your property with a modern kitchen and bathroom, and focus on stylish design features.
• Ensure a good internet connection and space for a desk area or home office to facilitate remote working.
• Provide onsite amenities such as an onsite gym or laundrette.
• Provide outdoor space such as a balcony, terrace, or communal garden area.

When it comes to investing in property for beginners, deciding how you’re going to pay for the investment is a big element to consider.

For many investors, using a buy-to-let mortgage seems like the most suitable route to take.

If you want to know how to get an investment property when you haven’t got access to the entire immediate funds, you can opt for a buy-to-let mortgage to streamline the process.

Find out more about buy-to-let mortgages in this section of our property investment tips UK guide.

How Do Buy to Let Mortgages Work?

Similar to a regular mortgage, you can take out a loan on a buy-to-let property.

You’ll pay a deposit, otherwise known as a downpayment, and pay monthly mortgage repayments.

Different mortgage brokers and mortgage providers offer varying interest rates for buy-to-let mortgages.

This also depends on how much deposit you have and how long you want the mortgage for.

How Much Money Do You Need to Put Down on a Buy to Let Mortgage?

If you’re using a buy-to-let mortgage to buy an investment property, the minimum deposit you need to put down is usually 25% of the property’s value.

The more you have for a deposit, the lower your repayments will be and the better your chances of securing a mortgage.

It’s often said that you learn something new every day, but in the world of property investment this is something you should take to heart.

The best investors never stop learning about the property market as this way they can stay ahead of the curve when it comes to changes occurring in the property market.

There is always more information you can learn, and with how fast changes can happen in today’s climate it is important to keep up to date.

The buy-to-let market is a smaller chunk of the overall UK property market. How the market grows or falls will dictate how the buy-to-let market can operate, so you should keep an eye on statistics such as how house prices grow and the expected 5 year growth.

Here are several ways you can keep up to date with news about the UK housing market.

Read Property News Blogs

A good way of keeping up with the latest in the property market is by following property news blogs, written by experts in the field.

These are regularly updated with all the latest goings on in real estate, providing useful summaries of information that investors need to know. This way you can keep informed of important topics likely to affect the property market without needed to trawl through facts and figures on your own.

We here at RWinvest regularly update our property news blogs, with a team of dedicated writers who keep a close eye on the property market for any developments or changes that occur.

Sign Up for Email Updates

Signing up for email updates from several different sources is a good way of having important news sent to you without having to spend time scrolling through Google to find what you need.

This way you can have the latest news sent straight to you from reputable sources.

It’s important to find several email updates to sign up for rather than just one source of information. This way you can get the most accurate information without having to determine if where you are getting your information from is biased.

Setting up Google alerts for words that commonly come up, such as ‘property investment’, ‘UK housing market’ and ‘buy-to-let property’, is also a good way of getting updates by email. This way Google does the searching for you, and finds reputable sources for what you need.

Track House Indexes

A good way of tracking how house prices are changing across the UK and in individual regions is through house indexes. These track the sale of properties over time, which allows you to see where house prices are rising.

As a buy-to-let investor, there are three main indexes you can keep track of.

The Land Registry’s UK House Price Index tracks all transactions within a given month to provide data on how the entire UK house market is performing, as well as breaking down data by each nation, region and city.

However, this data normally takes two months to collect, so it is not the most up to date index available, even if it is the most accurate due to the amount of data. While there are several other house price indexes available that are updated faster, this is the most accurate.

The Homelet Rental Index is also important for buy-to-let investors to keep track of, as it follows how rental prices go up or down in a given month. This is important to track as it gives you an indicator of how much rent you should be charging.

As mentioned earlier, you earn returns from your investment properties in two ways:

Rental income, which you collect from tenants each month to create a consistent cash flow of passive income.

Capital growth, where the value of your property grows over time so you can hopefully sell the property for more than you bought it for.

Many investors choose to focus on one of these methods of income over the other, as it is rare to find a property where you will see strong returns through both methods.

Would you prefer to have a monthly cash flow of income to do with as you please, or would you rather have a more sizeable return on your investment in one go that takes time to develop?

Why Choose Rental Income?

There are several benefits to focusing on earning rental income as your primary method of getting returns on your investment:

• The monthly cash flow ensures there’s always money in your pocket.
• You can use the income to pay for costs of owning property, such as maintenance or mortgage repayments.
• You can earn more over time as rental income increases. Research from Homelet indicates that rental prices have risen by 9.9% in the last year.

However, there are some cons to consider as well:

• You are unlikely to be able to save a considerable amount of money, given part of the income will need to be spent on the property.
• You may not make as much of a profit when it comes to selling your property if your focus is on rental income and not capital appreciation.

Why Choose Capital Growth

Focusing on capital growth with your buy-to-let properties has several benefits you should consider:

• You could make a considerable profit by selling your property once its market value has increased. House prices are expected to rise by 6.2% across the UK by 2027, according to Savills.
• You can make the most of the property market by choosing when to sell your property when prices are rising to achieve the most profit.
• Investing for capital growth is considered relatively safe and is well-suited to risk-averse investors.

Despite these positives, there are some reasons why investing for capital growth might not be for you:

• It takes a long time to build up capital growth. You will need a lot of patience if you want to see a profit through this method of investing.
• By not focusing on rental income, you may not see as much of a consistent cash flow.

Property investment can be daunting when you are taking your first steps. Finding the right kind of properties to invest in, understanding how to pay for your buy-to-let property and what to do once you have invested are all subjects that can be complicated to navigate on your own.

As such, you should try and get in touch with experts in investing to get a better understanding of property investment and what kind of goals you should set for yourself.

Here are some examples of experts you could seek property investment advice from.

Financial Advisors

If you are unsure of your goals when investing, or the budget with which you can invest, you should consider discussing your situation with a financial advisor.

They can advise you on if property investment is right for you, as well as suggesting a realistic budget to invest with based on your financial situation.

Speaking to a financial advisor is recommended before you start investing, as they will be able to give a professional opinion on whether property is the right investment strategy for you.

Estate Agents

In regards to the housing market in general, it may be worth your time to speak with an estate agent to discuss your options.

They will have a good understanding of both the national housing market and the market of the area around you, and should hopefully be able to steer you towards areas with a combination of high rental yields and affordable prices.

This will help you understand more about the housing market in detail, and combined with the investment strategy you will have planned with your financial advisor, this gives you a good idea of how you want to invest your money.

Property Investment Companies

When it comes to investing in buy-to-let property, there are arguably no better experts than a property investment company.

Specialising in helping clients find the best investment opportunities across the UK, property investment companies are able to answer questions you may have about investing in property as well as tailor an investment strategy to fit your needs and budget.

Here at RWInvest, we pride ourselves on supporting our clients through every step of their property investment journey. Our Client Care and Post-Sales teams help clients long after the sale has been completed.

If you have your heart set on a particular investment property that happens to be out of your price range, you will need to consider alternate forms of paying for the property.

While payment plans and buy-to-let mortgages are perfectly viable options, they mean having to continue paying for the property over time. Unless you are able to generate the necessary money, this could be difficult.

An alternate way of investing out of your budget is to invest with a partner, combining your budgets to split the returns on a larger or more expensive property. This way you can also expand your buy-to-let portfolio quicker, as you are investing less money each time.

You can often benefit from each other’s unique skills, expertise or knowledge to help make your investment profitable. By working as a team you can help get the heavy lifting involved with investing done quicker and easier.

However, there are complications that arise with investing with a partner.

Arguments may happen which could fracture the working relationship, making it more difficult to manage your investment property.

You will also see less returns when investing with a partner than you would if you were to invest on your own, due to having to split the profit you make.

If you choose to use a buy-to-let mortgage, you will both be individually held responsible for it, and if your partner is unable to keep up with the mortgage repayments then your credit score will be affected as well.

To learn more about investing with a partner and if it is right for you, try our handy guide on the subject.

While your main focus should be on investing in UK property, given the stability of the housing market and the potential for growth, you may wish to consider also researching property markets from around the world.

Several property markets are large enough to affect the global housing market if something were to happen, and as well as this there are several housing markets that present intriguing opportunities for those looking to invest abroad.

China

China is the world’s largest property market, bigger than the entire US stock market combined. The Guardian valued its worth at being between $55tn (£47tn) and $60tn.

While you may not want to invest in property in China, you should keep an eye on how the market is performing. Given its size, any serious instability or crash would have wider effects on the global housing market due to the number of international investors.

Recent events such as mortgage strikes have caused some to worry about the condition of the market, and although it is unlikely to crash thanks to government intervention, it is a situation to keep an eye on.

USA

The second largest housing market in the world, according to Savills, the US housing market is evaluated as being worth up to $42.1 trillion.

However, the housing market in America has been in steady decline for several years due to affordability issues and rising mortgage rates.

Regional housing markets often overvalue or undervalue properties as well, which is contributing to the decline of the market.

Investing in property takes time and effort. There may be complications along the way, from solicitors slowing the process down with paperwork to issues with construction of the property to damage done when tenants are moved in.

It is easy to get frustrated at times and to lose faith in your investments given the long-term nature of investing in property.

Therefore it is important to remind you to stay positive throughout the process of investing.

Here are several things you can do as an investor to help maintain the right attitude towards investing:

Be Patient

Property is a long-term investment, especially when it comes to capital appreciation. It will take a long time to see strong returns begin to accrue on your investment.

Therefore being patient is key when it comes to having the right mindset as an investor. If you are looking to make money quickly, then this is not going to be the investment strategy for you.

Understand that it will take time before you start seeing profit on your investment, and this will help you stay positive in the long run.

Remember – it’s a marathon, not a race.

Be Prepared

Doing your research and due diligence before, during, and after you invest in property is also a good way of keeping positive.

This way you will know of the risks that come with investing in property, as well as being aware of how it is a long-term investment.

Jumping in with both feet only adds to the risk and can lead to miscommunication and frustration if the results are not what you expected.

By researching about property investment ahead of time, you are keeping your expectations reasonable and understanding issues that may arise.

Be Open to Change

The property market is ever-shifting and changing, and so having a degree of fluidity with how you handle investing is key.

If you are dead-set on a single investment strategy you may run into trouble if the market shifts and your plan is no longer as viable.

By keeping an eye on how trends in the property market, you are able to regularly assess if your strategy is still viable and come up with alternate solutions if problems arise.

Having a willingness to change and grow is a great way of maintaining a positive attitude when investing.

Simply leaving your investment properties alone to generate income is certainly a reasonable method of investing. After all, one of the main selling points of investing in property is how it is able to generate a passive income for you over time.

However, the best investors will pay attention to how their properties are performing in several key areas. This is so they can see which properties are bringing in the expected amount of money or more, as well as those which are not.

You may find that you have an investment property in need of renovation, which would allow you to charge more rent and make more rental income as a result. Alternatively, a property you own might have built up enough capital appreciation for you to consider selling it for profit.

Here are several factors you should look for when assessing your investment properties:

How High are the Rental Yields?

Having a high rental yield is important to ensure you are getting a strong return on your investment.

You may find the operating costs of owning an investment property change over time, and as such unless you charge the right amount of rent you may find yourself making less rental income.

Therefore, you should aim to work out the NET rental yields of your property regularly, to keep on top of things and to ensure that you are charging the right amount of rent.

Generally, aim for a rental yield of around 6%. The national average currently sits at around 3.63%, so having a rental yield higher than this indicates you will make a solid return on your investment.

Your Property May Need Repairs or Renovations

Wear and tear happens to every property over time, but seeing as you are using investment properties for income rather than to live in, it is in your best interest to make sure it is kept to the highest standard for several reasons.

• You can charge more rent
• Tenants will be more drawn to your property
• It stops problems festering and becoming worse over time
• It ensures your property is up to the proper standards so you avoid legal issues

For these reasons and many more, it is best to deal with any requests for repairs as soon as possible.

You May Consider Selling The Property

Thanks to capital growth, properties increase in value over time.

Therefore your property may have increased in value enough for you to consider putting it back on the market to sell for profit.

This way, you can make a considerable return on your initial investment, and either use the money to reinvest in other buy-to-let properties or as a way of saving for important events such as retirement.