10 Ways to Start Investing in Real Estate

 

DOWNLOAD YOUR FREE GUIDE NOW

 

Contents

Click the icons below to jump to a section




Invest in Real Estate









Investing in real estate can be one of the most rewarding ways to grow your finances. Unlike operating on the stock market, real estate investing can be far more reliable and consistent. While stocks constantly fluctuate and often wildly fall in times of uncertainty, the real estate market remains remarkably consistent and can sometimes boom during an economic struggle. Like now, for instance, the industry is booming, with rental prices growing nationwide and house prices set to increase by 20% over the next four years. It seems like now may be the perfect time to invest in real estate- but where to start? Real estate investing for beginners can be intimidating, and starting off in real estate investing can be confusing as there are so many options. From buy to let investing to REITs, there are plenty of ways to spend your hard-earned cash. If you are wondering how to invest in real estate or how to get into property this is the guide for you. Here, we will outline 10 simple ways to start investing in real estate.

Learn More with Our FREE Guide to Investing in Real Estate

Getting Started in Real Estate

Submit Your Details Below and Receive Instant Access

1. Buy to Let Investing

Want to know how to start investing in real estate? Buy to let investing may be the best way. It is perhaps the most popular form of investing in real estate in the UK.

Buy to let is a term that refers to purchasing a property to let out to a tenant. For those who are insure how to invest in real estate, this is probably the best way to do it.

While becoming a landlord can be intimidating for some, renting out a property can be an excellent source of regular income. You can also potentially sell your property for a much higher amount than your purchase price later down the line. You may be asking yourself “is it the right time to invest in real estate?” and all the latest figures point to the fact that it is. The UK’s average rent is now £974, which is a 2.2% increase from last year. Excluding London, the average rent in the UK is up 4.2% compared to 2019. Along with the fact that house prices are set to increase by 20% over the next four years, according to Savills’ five-year house price forecast, property investment is undoubtedly a secure choice.

Rental prices can fluctuate across the country, along with house prices, meaning research is essential to know where the best places to invest in real estate are to maximize profits. Understanding rental yield is crucial, and knowing which cities offer the best rental yield is vital. Rental yield is the percentage of return on investment that an investor receives through rental income. Generally, yields above 5 or 6% are considered good. Currently, the North West is offering some of the best rental yields in the country. With yields of up to 10% in Liverpool and 7% in Manchester, both cities rank as some of the best cities to invest in real estate in 2020. The North West is clearly one of the best places to invest in property and ranks amongst the best places to invest in real estate. Coupling that with the fact that house prices are set to increase by over 27% in the region, it may be worth your time researching further if buy to let investing is right for you. Is it the right time to invest in real estate? The answer is certainly yes.

Currently, the North West is offering some of the best rental yields in the country. With yields of up to 10% in Liverpool and 7% in Manchester, both cities rank as some of the best cities to invest in real estate in 2020.

Daniel Williams, RWinvest

2. Buy Off-plan

Many people ask, “How much money is needed to invest in real estate?”. Investing in real estate can naturally be an expensive venture. UK house prices are currently rising at their fastest rate since 2016, and with the average house price sitting at a record high of £226,129 in September, many people no longer have access to the market. While buying houses in an auction or through an estate agent can be pricey, there is a form of buy to let investing that can cut down the price into affordable territory. Off-plan property may be the best answer for how to get into real estate investing.

Off-plan property investment is when an investor buys a property while it’s still in the planning or construction stage. It allows the investor to see how the property will look before built, either through a showroom or computer-generated imagery. Off-plan has several substantial benefits, the foremost being price. Off-plan can often be bought far below market value, with some developers offering additional discounts for those purchasing multiple properties. These hefty savings give an even more significant margin of profit.

If you ask, “how much money do you need to invest in property?” off-plan may be an excellent option for you. With house prices set to rise over the next few years, a unique benefit of off-plan is the ability to re-sell a property before completion. It may take a few years for a property to be built, meaning that the property could already be worth considerably more than what was initially paid upon completion. While you can keep the property for many years to see the benefit of strong capital growth, those investors who want a quick profit could consider selling upon completion. However, keep in mind that by doing this you would be limiting your potential returns through both rental returns and capital appreciation.

When buying off plan it is also important to consider the reliability of the property development companies working on the build. We here at RWInvest only work with the best and most reliable developers, such as Legacie Developments, to ensure your investment is in safe hands.

Here at RWInvest, we offer some excellent off-plan opportunities. We have properties in both Liverpool and Manchester, which rank as two of the best cities to invest in real estate 2020. From One Baltic Square in Liverpool to Merchant’s Wharf in Manchester, all of our properties come with high-speed Wi-Fi, which is a vital feature in the modern day.

 

Invest in UK Real Estate Today with RWinvest

View Properties

3. Invest in REITs

Another way of investing in real estate is by investing in a Real Estate Investment Trust.

A Real Estate Investment Trust is a company that owns and finances rental properties on behalf of shareholders. They work in the same way as mutual funds, whereby private investors contribute money that is then pooled into one fund. The company then uses this fund to buy properties, with most of the income going to its investors.

To be eligible for investing in real estate, UK REITs must follow several rules. They need to give out at least 90% of their property rental business income to their shareholders each year. Also, three-quarters of their profits must come from the property rental business to operate as a REIT.

There are several advantages to buying stock in a REIT. Firstly, as the company has to pay at least 90% of its income as dividends, management cannot decrease the dividend payment. Furthermore, REITs can help diversify a real estate portfolio by buying more property than an individual would be able to buy.

However, there are plenty of downsides to investing in a REIT. REITs act like any other company listed on the stock market, which means you can buy and sell stocks in the REIT. This also has the downside of a REITs equity price continually fluctuating, making the investment less secure than traditional real estate methods. Secondly, profits are split amongst potentially thousands of investors, making it likely you won’t earn as much money as buy to let investment. Finally, high dividend percentage payouts can often force REITs to enter debt to expand real estate holdings, which may not be sustainable for the future. For investing in real estate, UK landlords would most likely get more income from buy to let investing.

4. House Flipping

One answer for how to invest in real estate is house flipping.

House flipping is when an investor buys a property, usually an undervalued property, and then aims to sell it on for a profit quickly. There are two types of house flipping: repair and upgrade, with the second being hold and re-sell.

Repairing and upgrading refer to the idea of an investor purchasing a property and then renovating it. This is a longer-term investment as some properties can require plenty of work to sell for a considerable profit. Several factors can also go wrong in this method, and you could end up spending a fortune for little gain. You would need to be incredibly knowledgeable about the market and resourceful, with plenty of cash to spare, to take on this method.

Another way of house flipping is holding and re-sell. This involves purchasing a property that can make a profit without any alterations or work needed. Understanding property values and what properties have intrinsic value is critical for this method. There’s no doubt that house flipping requires expert knowledge and plenty of money to be successful.

Often, flippers don’t keep the money for mortgages or house costs, meaning that if they don’t sell the property within six months or so, they can land themselves in a heap of issues. If you ask “how to invest in real estate?” or “what are the costs to invest in real estate?” and want to feel secure in your investments, this risky method may not be for you.

5. Invest in HMOs

Another form of buy to let investing worth considering are Houses in Multiple Occupation or Houses of Multiple Occupancy (HMOs).

An HMO is a property which is rented by three or more people who are not family. They share facilities such as bathrooms or kitchens and can appear in the form of student accommodation.

On the surface, HMOs appear to be a great investment. They offer rental yields which can be as much as three times higher. There are fewer void periods as even if one resident moves out, at least some will remain. Lastly, student accommodation is always high in demand, particularly in cities like Liverpool and Manchester with huge student populations.

However, owning and investing in HMOs can be incredibly complicated. Firstly, securing a mortgage can be difficult compared to a second home or normal buy to let property. Secondly, they can be incredibly expensive to startup compared to buy to let properties. HMOs are hit with several stringent rules and regulations. Buying furniture for the property and meeting fire and environment health regulations can get pricey before a council will approve you.  Not only this, but you would need to find a large property in order to fit in multiple tenants, which would command higher prices. Lastly, if you ever considered selling your investment, the market would most likely be restricted to only other property investors and landlords. This means a limited capital growth.

Firstly, securing a mortgage can be difficult compared to a second home or normal buy to let property. Secondly, they can be incredibly expensive to startup compared to buy to let properties.

Daniel Williams, RWinvest

6. Rent a Room in Your House

If you want a taste of being a landlord but aren’t yet ready to get involved with investing in real estate, or are asking how to get into real estate investing in a simple way, you could try renting out part of your house.

Through sites like Airbnb, you can rent part of your home to tourists, or you can provide part of your property to a long-term tenant. Whatever option you fancy, renting out a room could be a more accessible way to get started for beginners.

The government has also got schemes in place, such as the Rent a Room scheme, that lets you earn up to £7,500 per year tax-free from letting out furnished accommodation in your home. Although, this is halved if you share that income with a partner or someone else.

While this method is a decent way to get started in real estate investing for beginners, you may be unsure when your next tenant appears. This can naturally impact income, and you could go weeks or months without earning anything from the room. And now, with the covid-19 pandemic, people are far less likely to travel and hence far less likely to use your services.

Overall, this method does not provide sizeable income, and you should consider other strategies for maximizing revenue.

7. Invest in Property Abroad

For seasoned investors, expanding your portfolio and investing in real-estate abroad may be an exciting prospect.

You may be attracted to the idea of an overseas property with promises of better capital growth and higher rental yields, along with the prospect of buying property cheap in developing areas. Of course, there is also the added benefit of having a holiday home, which may be something that excites you.

While investing in real-estate abroad can, in theory, be a good idea, there are several risks involved. Firstly, as a UK landlord, there are already several responsibilities that need attention, but with properties abroad, these responsibilities become far harder to manage. From organizing the property to be cleaned to ensure it is secure, you may continuously be nervous about your investment’s welfare. Secondly, while the idea of buying a property for cheap in developing areas may sound exciting, the local economy could crash, having enormous implications for your investment.

You would also need to consider the location of your property, along with how attractive it would be to tourists. Another factor worth considering is the fact that there may be a popular holiday season in the area. This can, of course, be good for your profits, but when the season ends, you may have a complete lack of business – while paying mortgages and taxes.

Overall, if you have expertise and knowledge of foreign markets, it could be a good idea. But with the added stress of maintaining property abroad and the lack of security on your investment, it makes more sense to invest in a reliable market and investing in real-estate in the UK.

8. Hire a Property Manager

If you are interested in buy to let investment but don’t want to deal with the responsibilities involved with being a landlord, hiring a property manager could be an ideal solution for you.

You should consider hiring a property management company if you have an extensive portfolio of properties or don’t live near your rental property.

Many landlords enjoy controlling their properties, however dealing with multiple tenant issues can be stressful, especially if you are a beginner, which is why property management companies can be helpful. Firstly, they act as a point of contact for your tenant rather than yourself. Their services can cover a 24-hour basis, so your tenants won’t miss out if you are busy.

Another significant benefit is the assurance that rent is paid on time. Property managers can help alleviate the pressure on landlords by collecting rent payments. They also have the power to enforce lease policies, so the stress involved in dealing with difficult tenants can be avoided.

Overall, hiring a property manager may be something you wish to consider if you decide to invest in real estate in the UK.

Invest Today with RWinvest

View Properties

9. Property Crowdfunding

For some, buy to let investment can be out of their price range, but they still want to get involved in UK real estate. As an alternative, some investors group to fund a purchase. This is called property crowdfunding.

Property Crowdfunding is when a group of people pool their capital to buy a single property asset. This means that each investor owns a small share of the investment.

While crowdfunding can refer to a group of friends grouping together to buy a property, the phrase typically refers to an online platform that brings together many investors.

The process in which crowdfunding platforms work is relatively straightforward. Firstly, the crowdfunding platform identifies a suitable property. Investors then say how much they want to invest until the purchase is 100% funded. You can put anything from £100 to £1,000 into the pool, depending on how much you can afford. The platform then forms a dedicated company to buy the property, and the investors are given shares in the new-found company proportional to the amount contributed. The new company then finds tenants and manages the day to day costs of the property, with rental income minus the expenses being paid to shareholders in the form of a dividend.

Similar to REIT’s, due to the number of shareholders, your returns will likely be far lower than owning property directly. Furthermore, you have no control over the property management like rent, location, or even if the property is kept or sold.

If you have very little money, this may be a way to get into the real estate market, but it seems far more worthwhile to get involved with a more secure investment like buy to let.

10. Invest in Property Bonds

Another method for real estate investing is with property bonds.

Property bonds are a way for developers to raise capital for projects, and they do so by receiving money from investors in the form of loans.

The bond is often a legally binding agreement between an investor and the developer. The contract typically outlines how the investment will be used, the loan’s interest, and when the investment will be repaid. For investors, getting involved in Real Estate is attractive because of the high fixed rates of interest on the loan.

This form of investment should most likely only be considered by seasoned investors with disposable incomes. While you can receive some attractive returns, there are risks involved, chiefly regarding the company’s credibility offering the bond. If the project isn’t viable or not credible, you could lose your investment.

Overall, if you have asked “how to invest in real estate UK?” hopefully this guide has answered your question. Starting off in real estate investing can be tricky but there are many ways to get involved in property investment. You can invest in real estate or stocks, ranging from secure opportunities to risky strategies. Buy to let investments and off-plan property seem to be the most secure form of real estate investing, offering high rental yields, and excellent sell-on prices. Strategies involving the stock market such as REITs seem to be riskier, with stock prices continually fluctuating, particularly in times of crisis like the COVID-19 pandemic. So, if you are asking whether to invest in real estate or stocks, the former seems to be a far safer bet. How much money is needed to invest in real estate ranges wildly from £100 all the way to £20,000 plus. However, with so many choices, there’s an option for everyone. It seems now is the perfect time to invest in real estate.

While you can receive some attractive returns, there are risks involved, chiefly regarding the company's credibility offering the bond. If the project isn't viable or not credible, you could lose your investment.

Daniel Williams, RWinvest

Real Estate Investing UK - Things to Consider

If you want to get started in Real Estate investing, UK landlords will have several things to consider- mainly costs.

For those considering how much money is needed to start investing in real estate, costs can wildly vary from investment to investment. For options on the stock market, such as REIT’s, the amount you invest will directly correlate with how much you receive back in dividends. You can put in as much money as you want in these investments, depending on the price of a share, but the amount you receive back will be minimal. It is also worth considering that these stock prices will fluctuate, so you may be able to sell on your share for a quick turnover if the price rises, but likewise you may lose out on your investment if the stocks tank.

Buy to let investing, on the other hand, while more expensive than a REIT, will provide you with far higher revenue for a much longer period. It is also more secure, with house prices set to increase by 20% in the next four years. Of course, buy to let investing costs can fluctuate from city to city, and investing in London for instance will be far more expensive than Liverpool. Investing in an affordable city such as Liverpool will mean you can find excellent investment opportunities for £100k or less.

For real estate investing, UK cities like Liverpool seem to be a safe bet, but you should also consider additional costs. From solicitor fees, to Stamp Duty tax, there are fees that need to be factored in when considering your investment. You may want your property surveyed which can incur fees from £300 to £600. If you want a property management company to deal with your property, these will incur extra costs too, and you can usually expect to pay around 10% to 15% of the rental income you receive.

So, how to get money to invest in real estate? Many people who decide to purchase buy to let property often use a buy to let mortgage.

A buy to let mortgage is very similar to a regular residential mortgage, however they can often incur higher interest rates. To be eligible for a buy to let mortgage you need to already own your own home, have a good credit score, and earn over £25,000 year.

Usually, your buy to let mortgage deposit will be a minimum of 25 per cent of the property value, but this can vary from anywhere between 20 to 40 per cent. This means if your property were valued at £120,000 for instance, you could pay a deposit of around £30,000.

Another option for financing your investment is to plan investments with a payment plan. This is a service offered by us here at RWInvest, which allows investors to split costs into several payment installments. It makes investing easier and more accessible.

How much money to start investing in real estate?

For those considering how much money is needed to start investing in real estate, costs can wildly vary from investment to investment. For options on the stock market, such as REIT’s, the amount you invest will directly correlate with how much you receive back in dividends. You can put in as much money as you want in these investments, depending on the price of a share, but the amount you receive back will be minimal. It is also worth considering that these stock prices will fluctuate, so you may be able to sell on your share for a quick turnover if the price rises, but likewise you may lose out on your investment if the stocks tank.

Buy to let investing, on the other hand, while more expensive than a REIT, will provide you with far higher revenue for a much longer period. It is also more secure, with house prices set to increase by 20% in the next four years. Of course, buy to let investing costs can fluctuate from city to city, and investing in London for instance will be far more expensive than Liverpool. Investing in an affordable city such as Liverpool will mean you can find excellent investment opportunities for £100k or less.

For real estate investing, UK cities like Liverpool seem to be a safe bet, but you should also consider additional costs. From solicitor fees, to Stamp Duty tax, there are fees that need to be factored in when considering your investment. You may want your property surveyed which can incur fees from £300 to £600. If you want a property management company to deal with your property, these will incur extra costs too, and you can usually expect to pay around 10% to 15% of the rental income you receive.

How to get money to invest in real estate

So, how to get money to invest in real estate? Many people who decide to purchase buy to let property often use a buy to let mortgage.

A buy to let mortgage is very similar to a regular residential mortgage, however they can often incur higher interest rates. To be eligible for a buy to let mortgage you need to already own your own home, have a good credit score, and earn over £25,000 year.

Usually, your buy to let mortgage deposit will be a minimum of 25 per cent of the property value, but this can vary from anywhere between 20 to 40 per cent. This means if your property were valued at £120,000 for instance, you could pay a deposit of around £30,000.

Another option for financing your investment is to plan investments with a payment plan. This is a service offered by us here at RWInvest, which allows investors to split costs into several payment installments. It makes investing easier and more accessible.

How to invest in Real Estate UK? Try RWInvest!

If you are still asking “how to start investing in real estate?” or “how to invest in real estate UK?” and want to enter the world of real estate investing, RWInvest is here for you. We are an award-winning market leader in UK property investment with over 15 years’ experience. We specialize in buy to let investment with several top quality off-plan properties available. We have several properties located in buy to let havens like Liverpool and Manchester and offer exciting opportunities to make excellent investments. Contact our specialist sales team today to find out more.

New Launch

Merchant's Wharf

Salford Waterfront Apartments

Manchester Prices from £149,950

Up to 6.5% Projected Rental Return

55% Below Market Value

New Offer Announced

One Baltic Square

Voted Coolest Place to Live

Liverpool Prices from £121,950

7% NET Return for 3 Years

£190m Baltic Triangle Regeneration

New Units Just Released

City Residence Apartments

Deluxe Apartments with Balconies

Liverpool Prices from £114,995

7% NET Rental Return

Near £5.5 Billion Regeneration Area