How Much Money Do You Need to Invest in Property in the UK?

Should I Invest in UK Property in 2021? 

Before we get into the nitty-gritty of this guide, it’s important to address if investing in property in UK 2021 is a good idea for you. 

First and foremost, there are five main reasons why you should invest in UK property in 2021. 

1. UK house prices are growing at the fastest rate since 2004. 
2. Rent is currently £1,061 pcm on average, according to HomeLet Rental Index – the highest-ever recorded. 
3. Property demand is high, with buyer demand per property for sale more than double pre-pandemic levels. 
4. House prices are set to rise by up to 28.0% by 2025, according to Savills. 
5. Bricks and mortar is a reliable asset that performs well during times of uncertainty. 

However, while we think investing in property in the UK is an excellent choice, the reality is it won’t be for everyone. 

Property can be expensive, with UK property price averages currently at an all-time high of over £250k. 

As you will find out later, you’ll likely need around £30k to initially secure some of the most affordable buy to let properties on the market. 

Likewise, property is a long-term investment, as you will need to allow the asset to grow in value for the best returns. 

While there are ways to reduce the costs involved, it’s important to know that there are other strategies in the UK that could be more suited to your budget and investment goals. 

If you’re asking how to invest money in the UK, there are currently several popular investment strategies, including: 

• Rental Property 
• Invest in Shares 
• Shares Isas 
• Current Account 
• Investment platforms 
• Cryptocurrency 

Regardless of your budget, we have perfect guides that evaluate each of these strategies based on your budget and the return potential on offer. 

Our guides include: 

• How to Invest 50k 
• How to Invest 100k 
• How to Invest 500k 
• How to Invest 1 million  

Investing in Property UK 2021 – How to Invest Money in the UK Property Market? 

If you’ve decided that investing in property in UK 2021 is the right thing for you, it’s time to look at how to invest money in the UK property market and the costs involved. 

There are currently 10 incredibly popular methods for investing in property in UK 2021. 

Types of property investment include: 

1. Residential Buy to let Property
2. Student Accommodation Investments
3. Off Plan Property
4. Real Estate Investment Trusts UK
5. Buy to Sell
6. Property Investment Crowdfunding
7. Holiday Home Investments
8. Overseas Property Investment
9. Property Development
10. Commercial Property Investment

There are a lot of options for investors, with up and coming types of property investment including property funds, investment platforms, property crowdfunding, and real estate investment trusts UK. 

If you’re looking at investing in property for beginners, the best options are buy to let rental property, student accommodation, and off-plan property, as they are the most simple and easy to understand. 

The most difficult options will likely be buy to sell, real estate investment trusts UK, and overseas property investment, as they will depend on you understanding the property market and knowing how to identify good deals. 

For this guide, we are going to focus mainly on buy to let rental property, student accommodation, and off-plan property, as they are by far the most popular ways of investing in property in UK 2021. 

If you want to learn more about the other strategies, you can check out our guide at the top 10 best property investment strategies, where we give pros and cons for each method. 

What Is Residential Buy to Let Property? 

If you’ve searched “investing in property for beginners”, likely the best property investment strategy in 2021 for you is residential buy to let property. 

Residential buy to let property is property that is purchased to rent to a single tenant, including families. 

This strategy attracts heavy investment interest due to the ability to generate returns through both rental income and capital growth (the increase in a property’s value over time). 

While traditionally investors would purchase homes to rent to families, the most popular way of buying buy to let property in 2021 is through luxury city-centre apartments. 

This is because luxury city centre apartments attract interest from young professionals, who are more likely to rent, and stay renting, for many years. 

They’re also cheaper than detached and semi-detached houses, making it easier for investors to build a property portfolio and increase their income. 

How Much Money Do I Need to Invest in Buy-to-Let Property? 

So how much money do you need to invest in property in the UK if you opt for buy to let? 

Before we look into detail at the expenses, it’s important to establish what type of costs you will encounter when investing in property. 

The costs involved with investing money in property can be split into three main categories. 

1. Upfront Costs – which include things like Stamp Duty and the cost of the property. 
2. Ongoing Costs – such as mortgage repayments and maintenance costs. 
3. Exit Costs – the expenses involved when you sell the property, including capital gains tax. 

The Upfront Costs of BTL 

Currently in the UK, the average property price according to the Land Registry is valued at £255,535 as of October 2021. 

However, prices can vary heavily, depending on what type of property you’re looking to buy, and the location of the investment (something we will discuss later). 

While these prices may be out of the range of most investors and landlords, one of the central benefits of buy to let when it comes to financing your investment is that you can use a buy to let mortgage. 

Buy to Let Mortgage 

Buy to let mortgages work slightly differently than normal residential mortgages, as they require higher deposits, usually 25%, and they are interest-only. 

This means you will only pay the interest every month without touching the overall debt. Then, come the end of the mortgage period, you will need to pay off the full debt by either selling the property or remortgaging. 

You can read our full guide to buy to let mortgages and BTL tax in our detailed beginner guide. 

The other main cost you will see is stamp duty land tax.

Stamp Duty Land Tax 

Stamp Duty Land Tax is a tax paid on the purchase price of a property in England and Northern Ireland. 

As of October 1, 2021, the Stamp Duty tax holiday, which has been ongoing since July 2020, finally ended. 

This means that investors will now pay more on stamp duty than they would have previously. 

The tax operates under a progressive tax system meaning you will pay different tax rates on certain portions of the property price. 

To learn more about stamp duty and calculate how much you will pay, check out our stamp duty calculator. 

If you’re a first-time buyer, you can also check out our first-time buyer stamp duty ultimate guide by clicking the link. 

Current rates are:  

Legal Fees, Land Registry Fees, and Cash Buffers 

Aside from mortgage costs and stamp duty, there are some other expenses you can expect when investing in UK property. 

They are: 

• Legal Fees – A solicitor will need to be hired to handle the legal paperwork. This can cost anywhere between £1,000 and £2,000. 
• Land Registry Fees – Houses sold between £100,001 to £200,000 will cost a £200 land registry fee, while houses between £200,001 to £500,000 will cost around £300. 
• Cash Buffer – It’s a good idea to have some cash spare to deal with any surprise costs – potentially around £2,000. You could also use a cash buffer to update furniture.  

Overall Upfront Costs for Residential Property 

Below you find an estimated total for costs you could expect to pay upfront at varying property prices points if you use a mortgage. 

Ongoing Costs and Exit Costs for Buy to Let Property 

When investing money in property, there are other costs than just the upfront expenses. 

Potential ongoing costs for investing in UK property include: 

• Mortgage interest rates 
• Ground rent 
• Property management fees (if you want a hands-off investment. Check out our guide to how to manage your investment property to learn more). 
• Maintenance costs 
• Corporation tax if you form a limited company 
• Landlord insurance/ buy to let insurance 
• Rental income tax 

Upon the sale of your property, you will also need to pay some fees before you can (ideally) net your profit. 

Examples of exit costs include: 

• Capital gains tax 
• Estate agent fees 
• Legal fees 

What Is Student Property Investment? 

Another excellent choice for investing in property for beginners is through student property. 

Student property investment has shot up in popularity in recent years thanks to some seriously attractive benefits. 

For starters, student accommodation is far more affordable than residential property, helping to deliver investors far higher returns than they normally would. 

Most student accommodation also has its own dedicated property management company, meaning investors can usually have a completely hands-off investment. 

There are two main ways to invest in student property. They are: 

• HMOs – A property that is home to at least three tenants who share facilities like bathrooms and kitchens. 
• Purpose-built student accommodation – Property that has been specifically built for students. 

Currently, the most popular choice amongst investors is PBSA, with a report from Savills finding that over £5.77 billion was spent on PBSA in 2020 – a record-high. 

Just keep in mind that student accommodation investments don’t usually see large capital growth. If you’re focusing on capital appreciation as an investment goal, residential property is likely the better option for you. 

To get more information on student property investment and the latest tips in 2021, you can check out our ultimate student property investment guide by following the link. 

How Much Money Do I Need to Invest in Student Accommodation? 

Upfront Costs for Student Property 

Like residential property, student accommodation has much of the same upfront expenses but with one big difference – you’ll likely struggle to find a mortgage. 

This will mean you’ll often need to have the entire cash payment on hand, with student properties usually found below the £100k mark. 

Notably, if you invest through a property investment company, you can sometimes use payment plans to purchase the accommodation, with sometimes smaller deposits needed between 20-50% upon the exchange of contracts. 

You’ll also save a tonne on buying a property if you choose off-plan – something we will address in the next section. 

Overall, though, upfront costs for student accommodation property will include: 

• Purchase Price 
• Stamp Duty Land Tax 
• Legal fees 

Ongoing Costs and Exit Costs for Student Property 

For investing money in student property, you’ll encounter most of the same ongoing and exit costs attached to residential property, minus mortgage interest payments. 

Potential ongoing costs for investing in UK student property include: 

• Ground rent 
• Property management fees  
• Maintenance costs 
• Landlord insurance/ buy to let insurance 
• Rental income tax 

Examples of exit costs include:  

• Capital gains tax 
• Estate agent fees 
• Legal fees 

What Is Off-Plan Property? How to Invest in Property UK With Little Money 

If you want to know how to invest in property in the UK with little money, your best bet is by buying off-plan property. 

Off-plan property is a new-build property that is available to be purchased but hasn’t yet been completed. 

You can buy both residential and student property off-plan. 

While it sounds risky investing in an unfinished asset, the main benefit is affordability. 

Off-plan properties are usually offered at below market value rates as an incentive to invest. For instance, Merchant’s Wharf Manchester is 55% BMV. 

If you buy an apartment in an off-plan development, you’ll also be able to cherry-pick the best units first, likely ensuring the most tenant interest. 

To get a full breakdown of off-plan property investment and the benefits involved, be sure to check out our beginner’s guide for the latest tips and tricks. 

How Much Money Do You Need to Invest in Different UK Cities? 

In the UK, the answer to the question “how much do I need to invest in property?” can be a tough one to tackle. 

This is because there are huge regional differences in property prices, with some areas offering far higher return potential.  

So, the answer to “how much do I need to invest in UK property?” depends heavily on where you choose to invest money in property. 

Naturally, investors will want to find the best places to invest in property UK 2021 to make the best investment possible at the most affordable price. 

Most investors would agree that some of the best places to invest in property in UK 2021 are: 

• Liverpool 
• Manchester 
• Birmingham 
• Luton 
• Leeds 

These locations offer excellent affordability, while also benefiting from considerable rental yields and tenant demand. 

Below you will find a breakdown of the average prices seen in this area to show you how affordable investing money in property in these areas is in 2021. 

To get a full top 10 list of the best places to invest in property in UK 2021, with a deep dive into the local rental markets, average rental yields, property pieces and more, be sure to check out our ultimate guide.