Cost: 3/5
Potential Returns: 5/5
Time to Earn Returns: 4/5
Risks: 1/5
In our opinion, investing in buy-to-let property is one of the best things to invest in right now in the UK to make long-term passive income while avoiding unnecessary risks.
You can earn money from investment properties through two main methods. The first is rental income, where you collect rent from tenants living in your properties. This provides you with a consistent monthly income, which you can earn without doing much work, if any.
You can earn rental income as soon as tenants move into your property. With the high demand for rental properties we are currently seeing, matched by a low supply, this is likely to be a short wait. The Guardian reported in November 2022 that demand had risen by 23% in the past year alone!
The second way you can make money is through capital appreciation. Property tends to increase in value over time, so by the time you choose to sell your investment property, you will likely be able to make a significant profit compared to what you originally bought it for.
Thanks to these two methods of earning returns, investment properties offer the benefits of both a regular passive income and major profit in one go, something that few investment strategies, if any, can also give you.
There are multiple other benefits to establishing a buy-to-let investment property portfolio, making the method stand out from more common forms of investing.
If you want to be hands-off with your investment, you can hire a property management company that will handle the day-to-day running of your investment portfolio in return for a small cost of the rental income. This way, your investment properties will generate passive income and free you up to pursue other ventures.
Because it is a physical asset, property tends to weather times of financial uncertainty in a way other investment methods struggle to. Recent events from the 2007 financial crisis to the COVID-19 pandemic to Brexit have proven that property bounces back faster and stronger than other forms of investing.
Despite the political turmoil of 2022, the UK saw house prices grow by 12.6% from October 2021 to October 2022, according to the UK House Price Index. This is the most recent proof that the past performance of the property market has a track record of enduring events which would rattle the value of other types of investments.
This means you have a level of security when investing in buy-to-let that you cannot rely on with other types of investing.
In fact, as of October 2023, the UK property market reportedly began to be in a much better place, with Zoopla’s House Price Index for September 2023 recording a 12% increase in demand from buyers as a result of consumer confidence and improved market sentiment.
There are multiple ways of purchasing buy-to-let properties that mean you won’t need to break the bank.
One of the most common ways in which investors purchase property is by using a buy-to-let mortgage. This is similar to a regular residential mortgage, where you pay a deposit on the property and then pay the rest of the value off over time.
However, the two big differences are that deposits for buy-to-let mortgages are usually higher than those for residential mortgages, so you will need more money on hand to borrow one.
The second difference is that instead of paying off the remaining value of the property during the length of the mortgage, you instead pay off the accrued interest over time. Only at the end of the mortgage is the remaining value of the property touched.
Due to rising mortgage interest rates, this is not as popular an option for investing in buy-to-let as it once was. Instead, many are choosing to invest in off-plan property.
Off-plan properties are still in stages of development or construction when purchased, meaning you can secure the best units in development early to earn more rent down the line.
This means you cannot usually start earning rental income right away, but you will likely save money as off-plan properties are often sold for below-market prices, meaning you can buy them for cheaper than fully-completed properties.
Payment plans can also be set up when purchasing off-plan so that you can spread out the cost over time without having to worry about spending a large amount of money at once.
As you can see, you can invest in buy-to-let property at a range of price points, and benefit from the unmatched combination of security and long-term returns that it provides, so if you are wondering ‘what should I invest in right now in 2024’, property may be your best answer.
Please read our complete guides to learn more about buying UK property from the USA or overseas, how to build a property portfolio and the biggest investing mistakes to avoid.
