Property Investment UK: How To Invest in the UK

If you’re looking to invest in property, the UK is a great place to do so. The UK property market is one of the most popular investment markets in the world, offering high rental yields, growing house prices, and more.

Investors around the world are taking advantage of the opportunities available with UK property investment. However, while figures suggest that the market for property investment UK-wide is thriving, is investing in the UK property market a good idea? And how do I get started with property investment in the UK?

If you’re keen to find out everything you need to know about the different UK property investment opportunities available, what is an investment property and why you should consider UK property investment for 2020, 2021, and beyond, make sure you read our detailed guide.

We talk you through the different steps you should take if you want to invest in UK property, while listing the benefits of UK investment and covering the different types of property investments UK investors can choose from. Keep reading for our ultimate guide to investing in UK property.

Contents

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Explore Different Investment Options



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Know the Costs Involved



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Find the Right Property and Complete the Sale



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Investment Property UK – FAQs



What Is Property Investment UK? 

So what is UK property investment? An investment property is a property that has been purchased for the sole purpose of generating income. Investment properties in the UK can produce a return on investment in the form of rental returns or capital growth. Capital growth occurs when the value of the property has increased over time.

Explore Different Investment Options 

If you’re looking to purchase an investment property, it’s crucial to understand the different routes you could go down if you’re interested in property investment in the UK.

When it comes to property investment, UK investors must explore the different property types available to work out which investment property strategy is right for them.

While some property investors might choose to buy a residential property for the purpose of buy to let or buy to sell investment, other UK investors may opt for a less traditional UK property investment route.

To better understand the options available for property investment, UK investors should look at the below information on eight different ways to invest in property in the UK.

Pick a type of investment property you’re interested in to read more about

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1. Residential Buy to Let



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2. Student Buy to Let



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3. Commercial Buy to Let



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4. Holiday Lets



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5. Buy to Sell



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6. Property Development



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7. REITs



Invest In Student and Residential UK Property

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Know the Costs Involved

Along with the price of the property itself, buying property in the UK will come with a range of different costs. Here are some of the most significant costs associated with UK property investment that you should know about.

Those buying a property in the UK will need a solicitor to carry out the necessary legal work. Solicitor fees typically come from £850 to £1,500. However, to complete local searches, you will also need to pay around £250 to £300.

Estate agency fees only apply to those who are selling a property. For buy to sell or buy to let property investments, UK investors who are ready to exit their investment will need to pay estate agency fees when they put their property on the market. These fees are generally around 1% to 3% of the sale prices plus 20% VAT.

Many people buying property will choose to carry out a survey. Whether making an investment property purchase in the UK or buying a new home, getting the property checked by a surveyor is a good way to learn about any issues you should know about before you buy. Basic surveys usually start at £250, while a complete structural survey can cost £600 or more.

If you decide to hire a mortgage broker to help you find a mortgage or offer advice, you may be expected to pay mortgage broker fees. The amount you’ll pay will typically be a commission based on the value of the mortgage, with the average mortgage broker fee in the UK coming to £500.

Everyone who buys property in the UK is expected to pay stamp duty taxes. Costs are higher for those buying a second property, such as a rental property in the UK. Before June 2021, tax savings are available during the stamp duty holiday. Under normal circumstances, UK investors will need to pay 3% on property worth £125,000 or less, 5% tax on property worth £125,000 to  £250,000, and 8% tax on property worth up to £925,000.

Find out more about stamp duty costs with our stamp duty calculator for investors.

Those who buy UK property will need to pay certain insurance costs. Common insurance types include buildings insurance, contents insurance, and life insurance. When investing in property, UK rental protection insurance, liability insurance, and unoccupied property cover insurance are also popular with those who become a buy to let landlord.

Many UK investors will remortgage to buy a second home, using their existing equity to purchase a rental property in the UK. This is a common option but comes with some fees you should research if you plan to do this.

In June 2019, a law was passed which required landlords to pay for tenant referencing checks. Tenant referencing checks are important as they help investors find the right tenants for their rental property. UK tenant referencing checks will vary based on different providers and the level of detail. A simple tenant credit check, for instance, could cost no more than £20.

If you use a lettings agency to help you find tenants, you’ll need to pay agency fees. Again, the amount you pay will depend on the company you use and the services you opt for. If you just want a lettings agency to help find a tenant, you’ll pay less than you would if you decide to use a lettings agency to help you manage your rental property.

1. Solicitor Fees and Local Searches

Those buying a property in the UK will need a solicitor to carry out the necessary legal work. Solicitor fees typically come from £850 to £1,500. However, to complete local searches, you will also need to pay around £250 to £300.

2. Estate Agency Fees

Estate agency fees only apply to those who are selling a property. For buy to sell or buy to let property investments, UK investors who are ready to exit their investment will need to pay estate agency fees when they put their property on the market. These fees are generally around 1% to 3% of the sale prices plus 20% VAT.

3. Survey Fees

Many people buying property will choose to carry out a survey. Whether making an investment property purchase in the UK or buying a new home, getting the property checked by a surveyor is a good way to learn about any issues you should know about before you buy. Basic surveys usually start at £250, while a complete structural survey can cost £600 or more.

4. Mortgage Broker Fees

If you decide to hire a mortgage broker to help you find a mortgage or offer advice, you may be expected to pay mortgage broker fees. The amount you’ll pay will typically be a commission based on the value of the mortgage, with the average mortgage broker fee in the UK coming to £500.

5. Stamp Duty Costs

Everyone who buys property in the UK is expected to pay stamp duty taxes. Costs are higher for those buying a second property, such as a rental property in the UK. Before June 2021, tax savings are available during the stamp duty holiday. Under normal circumstances, UK investors will need to pay 3% on property worth £125,000 or less, 5% tax on property worth £125,000 to  £250,000, and 8% tax on property worth up to £925,000.

Find out more about stamp duty costs with our stamp duty calculator for investors.

6. Insurance Costs

Those who buy UK property will need to pay certain insurance costs. Common insurance types include buildings insurance, contents insurance, and life insurance. When investing in property, UK rental protection insurance, liability insurance, and unoccupied property cover insurance are also popular with those who become a buy to let landlord.

7. Remortgage Fees

Many UK investors will remortgage to buy a second home, using their existing equity to purchase a rental property in the UK. This is a common option but comes with some fees you should research if you plan to do this.

8. Tenant Referencing Checks

In June 2019, a law was passed which required landlords to pay for tenant referencing checks. Tenant referencing checks are important as they help investors find the right tenants for their rental property. UK tenant referencing checks will vary based on different providers and the level of detail. A simple tenant credit check, for instance, could cost no more than £20.

9. Agency Fees

If you use a lettings agency to help you find tenants, you’ll need to pay agency fees. Again, the amount you pay will depend on the company you use and the services you opt for. If you just want a lettings agency to help find a tenant, you’ll pay less than you would if you decide to use a lettings agency to help you manage your rental property.

Can You Afford to Invest in Property UK? 

After considering the costs involved with a property investment, UK buyers should work out whether they can actually afford to invest in property. After all, you should only enter an investment when you feel financially secure enough to do so.

The main things to consider are:

  • How much money do you need to invest in property UK?
  • How much money do you have available to invest?
  • Can you afford a mortgage?
  • Will your rental income cover repayments?

Since the minimum deposit for a buy to let mortgage can be as high as 40% of the property price, it’s a good idea to have at least 50% of the property value available if you’re looking to use a buy to let mortgage to pay for your rental property in the UK.

However, the ideal scenario is for property investors to have the total cash available to buy their property. If you’re interested in buy to sell strategies that focus on ‘flipping’ property, for instance, this makes it easier to find the best property deals at auctions.

If you’re looking into property development as a UK investment property venture, you’ll need even more of a budget, so this is something you’ll need to accurately plan.

If you do decide to use a buy to let mortgage to pay for your investment, you’ll also need to think about whether the rental returns you generate from your investment will be enough to cover your monthly repayments while still leaving you a profit.

Use our rental income calculator to get a better idea of the rental income needed to sustain a buy to let mortgage.

Find the Right Property

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Complete the Sale 

The final step in making a property investment in the UK market is completing your property purchase.

If you’ve chosen to use a buy to let mortgage to pay for your investment rather than using cash, you’ll need to arrange your mortgage before you can complete the sale. For more information on paying for an investment property in the UK with a mortgage, be sure to check out our detailed buy to let mortgage guide.

Many investors or those buying property in the UK will pay for a survey on the property they’re interested in purchasing.

If you decide to do this, you’ll need to find a solicitor. If you’re investing in UK property with the help of a property investment company, you’ll often receive recommendations on the best solicitors to work with.

Once you’re happy with the property and feel ready to make a purchase, the next step will be to complete and exchange contracts, securing your property with a deposit.

Investment Property UK – FAQs

Based on the potential returns available and the current state of the UK property market, buy to let is the best type of property investment UK investors should consider.

By investing in UK buy to let, investors can gain regular rental income and capital growth returns. Those who invest in buy to let in the UK are also able to choose a hands-off investment if they prefer.

You might be wondering ‘why invest in the UK?’ and questioning whether property is a good investment in 2021. Here are some of the reasons why investing in the UK is considered such a lucrative venture.

Rental Returns are High 

Rental yields in the UK average out at around 5%, with potential rental yields of up to 10% in key cities like Liverpool.

Rental Values are Increasing 

Savills has predicted that rental values in the UK will grow by an average of 17% by 2025, with an increase of 4.5% by 2022 alone.

UK Property Prices are Growing 

UK house prices are growing at a rapid rate, having experienced record-breaking growth in 2020. By 2025, average UK property prices are estimated to have grown by 21.1%, with higher 28.8% growth expected for the North West region.

Tenant Demand is High 

Tenant demand is high in the UK for both the student and residential market. The covid-19 pandemic has led to a surge in people seeking new places to live, opening up opportunities for UK property investment.

Regeneration is Ongoing Throughout the UK 

Many UK cities and towns such as Liverpool, Manchester, Birmingham, and Slough, are undergoing extensive regeneration. This is helping to boost the already thriving UK economy and encourage further foreign investment in the UK.

When investing in property, UK buyers will want to ensure that their property investment venture is as profitable as possible. Here are the key things to keep in mind to make sure you get the most out of your investment in UK.

  • If you’re investing in buy to let, make sure to aim for the highest rental yields possible. Aim for at least 5%, or look for UK property investment opportunities offering yields of 7% or more for the best returns.
  • Whatever your UK investment property type, make sure you’re investing in an area with a strong track record of growth and some positive future predictions.
  • Make sure your property appeals to your target audience. As of late, people have become more interested in renting properties with features like a balcony or garden, fast WiFi connection, and space for a home office or desk. Keep current trends in mind to ensure you attract plenty of demand.
  • Keep costs down by looking for property investment UK deals and aim to keep maintenance and refurbishment costs to a minimum. Be sure to also invest before the end of the stamp duty holiday in June 2021 to benefit from huge tax savings.

What is the Best Type of Property Investment in the UK?

Based on the potential returns available and the current state of the UK property market, buy to let is the best type of property investment UK investors should consider.

By investing in UK buy to let, investors can gain regular rental income and capital growth returns. Those who invest in buy to let in the UK are also able to choose a hands-off investment if they prefer.

Is Property a Good Investment UK?

You might be wondering ‘why invest in the UK?’ and questioning whether property is a good investment in 2021. Here are some of the reasons why investing in the UK is considered such a lucrative venture.

Rental Returns are High 

Rental yields in the UK average out at around 5%, with potential rental yields of up to 10% in key cities like Liverpool.

Rental Values are Increasing 

Savills has predicted that rental values in the UK will grow by an average of 17% by 2025, with an increase of 4.5% by 2022 alone.

UK Property Prices are Growing 

UK house prices are growing at a rapid rate, having experienced record-breaking growth in 2020. By 2025, average UK property prices are estimated to have grown by 21.1%, with higher 28.8% growth expected for the North West region.

Tenant Demand is High 

Tenant demand is high in the UK for both the student and residential market. The covid-19 pandemic has led to a surge in people seeking new places to live, opening up opportunities for UK property investment.

Regeneration is Ongoing Throughout the UK 

Many UK cities and towns such as Liverpool, Manchester, Birmingham, and Slough, are undergoing extensive regeneration. This is helping to boost the already thriving UK economy and encourage further foreign investment in the UK.

How Can I Make My UK Investment Property Profitable?

When investing in property, UK buyers will want to ensure that their property investment venture is as profitable as possible. Here are the key things to keep in mind to make sure you get the most out of your investment in UK.

  • If you’re investing in buy to let, make sure to aim for the highest rental yields possible. Aim for at least 5%, or look for UK property investment opportunities offering yields of 7% or more for the best returns.
  • Whatever your UK investment property type, make sure you’re investing in an area with a strong track record of growth and some positive future predictions.
  • Make sure your property appeals to your target audience. As of late, people have become more interested in renting properties with features like a balcony or garden, fast WiFi connection, and space for a home office or desk. Keep current trends in mind to ensure you attract plenty of demand.
  • Keep costs down by looking for property investment UK deals and aim to keep maintenance and refurbishment costs to a minimum. Be sure to also invest before the end of the stamp duty holiday in June 2021 to benefit from huge tax savings.

If you’ve enjoyed our guide to property investment UK and want to find out more about investing in the UK market, be sure to check out our other informative guides.

We have guides on overseas investment and guides with information for those interested in foreign investment in the UK, along with in-depth market reports on top UK cities. We also have articles covering useful topics such as the best places to retire in the UK and the best areas to invest.

Disclaimer:

This property investment UK guide was last updated in March 2021. Depending on the date you read our guide, certain details may have changed in line with UK property market fluctuations. If you’re seeking financial advice before you invest in property UK, we recommend speaking to a financial advisor.

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