How to Create a Successful Property Investment Strategy

How to Create a Successful Property Investment Strategy

Every property investor knows the importance of creating solid property investment strategies. Property investment strategies for UK investors are like a business plan – you need to properly plan for your venture and do as much research as possible into the field before you get started.

If you’re thinking about investing in property in the UK but you’re not sure where to begin when it comes to your property investment strategy, this helpful guide is perfect for you. In this guide, we cover some of the most common property investment strategies in the UK, from residential buy to let to HMO investments. We help you work out which property investment strategy is right for you and which you should avoid, and offer tips on how to make your property venture as successful as possible. If this sounds helpful to you, keep reading for our top tips on how to create a successful property investment strategy.

What is a Property Investment Strategy?

Before we get started with exploring different investment strategies, you need to understand exactly what a property investment strategy is. In a nutshell, a property investment strategy is all about the way you will invest and the plan you will create. For instance, if you choose buy to let investment, you will purchase a property, and rent it out to tenants to make rental income. Then, you may choose to sell the property later in life and benefit from capital gains if the property has increased in value.

What are the Different Types of Property Investment Strategy?

To get you familiar with the various property investment strategies in the UK that you could consider, here is a guide to some of the most popular options.

Residential buy to let is the most common method of investing in UK property. The term residential means that the property is intended to be lived in by the tenant. Unlike student buy to let, there are a range of different tenants who could rent out a residential property, ranging from young professionals to retirees. A lot of the time, however, young professionals are likely to be the main tenant group that most people will attract when focusing on a residential buy to let property investment strategy. This is because younger people are a lot more drawn to renting, whether through choice or lack of financial ability to purchase a home of their own.

This type of strategy is viewed as one of the least risky compared to other property investment strategies in the UK, and therefore an easier and more effective way to make an attractive return on your investment. Of course, before jumping into a residential buy to let strategy, you would still need to carry out the appropriate research. This involves finding the best areas in the UK for buy to let, including those with high rental yields, a high level of rental demand, and strong capital growth rates. In the UK, the best cities to invest in are currently Liverpool and Manchester, which tick all the boxes thanks to affordability and regeneration.

Student buy to let is a similar property investment strategy to residential, with the only real difference being the property type you’ll invest in and the tenants you will rent to. The UK student market is currently booming, with a large number of students seeking stylish and well-located accommodation to live in during their time at university. Because student ideals are changing, with less and less students accepting the typical shared student housing of the past, there’s a lot of demand for a more high-quality style of accommodation. This is where investing in student buy to let developments comes in.

When focusing on cities with strong buy to let markets as well as a thriving university scene, this can be one of the most effective strategies when investing in property in the UK. Again, Liverpool is a top city to focus on for this kind of buy to let strategy, thanks to a student population of over 70,000 combined with high rental yields and affordable property prices. Student properties are typically less expensive than residential, but may have less likelihood of capital growth depending on the postcode you invest in.

Another of the most popular property investment strategies in the UK is buy to sell. Buy to sell is when an investor purchases a property which is in need of refurbishment, whether it’s run down and needs a complete renovation or simply features outdated designs and could do with an update. The buyer will then make any necessary renovations to the property, and then sell it at a time when the market is performing highly. This is often also referred to as a property development project.

Unlike a buy to let strategy, this kind of property investment strategy doesn’t involve renting the property out to tenants. The only type of return an investor will see with this strategy is capital appreciation, which means that the property needs to grow in value for there to be any benefit. If you purchase a property in an area where property prices are known to grow significantly, and you take all the right steps in renovating the property to the highest possible standard, you have a better chance of boosting its value. However, the kind of returns you could see with this may still be minimal compared to the extra income you would receive from also letting your property out.

An HMO is a house of multiple occupancy, and investing in this type of property is another of the most common investing strategies in the UK. Many view this as one of the best property strategies for gaining a return on investment due to the ability to generate rental income from multiple tenants within the same property. However, there are also a lot of downsides to this kind of buy to let strategy.

Firstly, there are more complex tax rules, planning requirements, and legislation requirements involved with HMO investments than single lets, which can be time-consuming if you’re aiming to manage your investment alongside your usual commitments. Getting a mortgage lender to agree to approve a mortgage loan can also be more difficult for HMO investments, as can finding a rental agent to work with. Perhaps most notably, the potential for capital growth becomes lower with an HMO. This is because the market for these properties is typically restricted to other HMO landlords.

Another strategy which involves buy to let is commercial property investment. With this, the investor purchases a unit in a commercial building, such as an office block, and rents it out to companies and business owners. These kind of properties tend to be offices, but can also be a retail or industrial space.

One of the main benefits of commercial investment compared to residential buy to let is the fact that each strategy involves different lease structures. When renting a property out to a residential tenant, the typical length of a lease is 6 months before the tenant can decide whether they wish to extend their tenancy. With commercial property, the leasehold is usually 12 months, which can give the investor more security. With commercial property, however, it may take longer until the investor can find a suitable tenant which could make void periods more likely. A shorter leasehold also isn’t usually an issue with residential property investment strategies. As long as the tenant is happy with the property and its management, the current shortage of supply and demand in the UK means that tenants are more likely to stay put in a high-quality property.

Finally, there are also some more alternative property investment strategies for UK investors to explore. One popular strategy includes hotel room investments, in which an investor purchases a room within a hotel and generates income from guest stays. Instead of having a tenant, you gain income from those travelling on business or a holiday. When it comes to investing in property, UK investors who want a completely hands-off investment may favour this property investment strategy. However, there are some disadvantages of this investment strategy to keep in mind.

Because a hotel is essentially a business, you’re at risk of the hotel failing which would damage your investment. This is a major downside for many investors as it leaves you with much less control compared to investments with a more traditional buy to let strategy. While it can be possible to make large returns if the hotel is popular and generates a lot of demand, another downside is the fact that if the hotel doesn’t see as much demand as you’d hoped, you will lose income due to void periods. This can come as a result of negative customer reviews of the hotel. If the hotel your investment is based in has a number of bad reviews online, less people will want to stay there. Again, this is something that’s ultimately out of your control if you don’t own the hotel yourself, and a bad reputation can be difficult to shake.

Residential Buy to Let

Residential buy to let is the most common method of investing in UK property. The term residential means that the property is intended to be lived in by the tenant. Unlike student buy to let, there are a range of different tenants who could rent out a residential property, ranging from young professionals to retirees. A lot of the time, however, young professionals are likely to be the main tenant group that most people will attract when focusing on a residential buy to let property investment strategy. This is because younger people are a lot more drawn to renting, whether through choice or lack of financial ability to purchase a home of their own.

This type of strategy is viewed as one of the least risky compared to other property investment strategies in the UK, and therefore an easier and more effective way to make an attractive return on your investment. Of course, before jumping into a residential buy to let strategy, you would still need to carry out the appropriate research. This involves finding the best areas in the UK for buy to let, including those with high rental yields, a high level of rental demand, and strong capital growth rates. In the UK, the best cities to invest in are currently Liverpool and Manchester, which tick all the boxes thanks to affordability and regeneration.

Student Buy to Let

Student buy to let is a similar property investment strategy to residential, with the only real difference being the property type you’ll invest in and the tenants you will rent to. The UK student market is currently booming, with a large number of students seeking stylish and well-located accommodation to live in during their time at university. Because student ideals are changing, with less and less students accepting the typical shared student housing of the past, there’s a lot of demand for a more high-quality style of accommodation. This is where investing in student buy to let developments comes in.

When focusing on cities with strong buy to let markets as well as a thriving university scene, this can be one of the most effective strategies when investing in property in the UK. Again, Liverpool is a top city to focus on for this kind of buy to let strategy, thanks to a student population of over 70,000 combined with high rental yields and affordable property prices. Student properties are typically less expensive than residential, but may have less likelihood of capital growth depending on the postcode you invest in.

Buy to Sell

Another of the most popular property investment strategies in the UK is buy to sell. Buy to sell is when an investor purchases a property which is in need of refurbishment, whether it’s run down and needs a complete renovation or simply features outdated designs and could do with an update. The buyer will then make any necessary renovations to the property, and then sell it at a time when the market is performing highly. This is often also referred to as a property development project.

Unlike a buy to let strategy, this kind of property investment strategy doesn’t involve renting the property out to tenants. The only type of return an investor will see with this strategy is capital appreciation, which means that the property needs to grow in value for there to be any benefit. If you purchase a property in an area where property prices are known to grow significantly, and you take all the right steps in renovating the property to the highest possible standard, you have a better chance of boosting its value. However, the kind of returns you could see with this may still be minimal compared to the extra income you would receive from also letting your property out.

HMO Investments

An HMO is a house of multiple occupancy, and investing in this type of property is another of the most common investing strategies in the UK. Many view this as one of the best property strategies for gaining a return on investment due to the ability to generate rental income from multiple tenants within the same property. However, there are also a lot of downsides to this kind of buy to let strategy.

Firstly, there are more complex tax rules, planning requirements, and legislation requirements involved with HMO investments than single lets, which can be time-consuming if you’re aiming to manage your investment alongside your usual commitments. Getting a mortgage lender to agree to approve a mortgage loan can also be more difficult for HMO investments, as can finding a rental agent to work with. Perhaps most notably, the potential for capital growth becomes lower with an HMO. This is because the market for these properties is typically restricted to other HMO landlords.

Commercial Property Investment

Another strategy which involves buy to let is commercial property investment. With this, the investor purchases a unit in a commercial building, such as an office block, and rents it out to companies and business owners. These kind of properties tend to be offices, but can also be a retail or industrial space.

One of the main benefits of commercial investment compared to residential buy to let is the fact that each strategy involves different lease structures. When renting a property out to a residential tenant, the typical length of a lease is 6 months before the tenant can decide whether they wish to extend their tenancy. With commercial property, the leasehold is usually 12 months, which can give the investor more security. With commercial property, however, it may take longer until the investor can find a suitable tenant which could make void periods more likely. A shorter leasehold also isn’t usually an issue with residential property investment strategies. As long as the tenant is happy with the property and its management, the current shortage of supply and demand in the UK means that tenants are more likely to stay put in a high-quality property.

Alternative Property Investments - Hotel Room Investing Strategies

Finally, there are also some more alternative property investment strategies for UK investors to explore. One popular strategy includes hotel room investments, in which an investor purchases a room within a hotel and generates income from guest stays. Instead of having a tenant, you gain income from those travelling on business or a holiday. When it comes to investing in property, UK investors who want a completely hands-off investment may favour this property investment strategy. However, there are some disadvantages of this investment strategy to keep in mind.

Because a hotel is essentially a business, you’re at risk of the hotel failing which would damage your investment. This is a major downside for many investors as it leaves you with much less control compared to investments with a more traditional buy to let strategy. While it can be possible to make large returns if the hotel is popular and generates a lot of demand, another downside is the fact that if the hotel doesn’t see as much demand as you’d hoped, you will lose income due to void periods. This can come as a result of negative customer reviews of the hotel. If the hotel your investment is based in has a number of bad reviews online, less people will want to stay there. Again, this is something that’s ultimately out of your control if you don’t own the hotel yourself, and a bad reputation can be difficult to shake.

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How do I Decide Which Strategy is Best for me?

To work out which of these investment strategies is right for you, you need to think about what it is you want to get out of investing in property in the UK. Are you focused on making regular returns from rental income, a large sum of money from a property sale, or both?

As mentioned, residential and student buy to let have the ability to offer two types of return on investment – rental returns and capital growth. While capital appreciation may be more significant with a residential buy to let strategy, the likelihood of capital growth with student accommodation is still a lot higher than with other investments like HMO’s, especially when purchasing property in top buy to let areas like Liverpool and Manchester.

You also need to factor demand into your overall decision, as without a good level of demand, your property could be hit by void periods where you lose income. It’s evident that in the UK, there is a lot of demand for high-quality accommodation thanks to an influx of young professional and student renters. By investing in student or residential buy to let, you’re able to benefit from this demand not only now, but most likely well into the future.

How Can I Make my Property Investment Strategy a Success?

Once you’ve decided what kind of property investment strategy you’re going to pursue, you need to follow certain steps in order to make your venture as successful as possible. Here are 3 tips to keep in mind for building effective UK investing strategies.

Every soon to be investor needs to understand the basics of an effective property investment strategy. If it’s a buy to let strategy you opt for, you need to know about two key elements of an effective strategy when investing in property in the UK – rental yields and capital growth. But as well as understanding these terms and knowing how to identify the best opportunities, you also need to realise that true property investment success comes from the right combination of the two.

When getting started with buy to let and exploring property investment options, it can be easy to get sucked in by impressive rental yields and low prices. While yields are definitely a big element of all good property investment strategies, you could be limiting your chances of success by focusing solely on this figure.

An investor who buys a residential flat in an affordable area of a city, for instance, could reel in some impressive yields if the property price was low and levels of demand are high. This is all well and good in terms of rental returns, but if the area the flat is based in is run-down with no signs of growth or regeneration, you’re missing out on your potential for capital growth and a rise in property values. By the time you come to sell the property, you could find that the market value has seen little change, or may have even dropped.

Every property investment strategy in the UK should factor in capital growth along with yields when selecting an investment type. Without doing this, you won’t benefit from the ability to make money from both rental returns and an increase in value when you choose to sell. Successful property investors will look at every way to make a return on investment to get the most out of their UK property investments with regular returns and capital gains. This way, investors using a buy to let mortgage to pay for their property can make enough to cover the repayments along with having the option to pay off the remainder of the property when they come to sell.

Once you’ve chosen a property investment strategy, you’ll have a good idea of the type of tenant who you should rent your property out to. Understanding your tenant profile is so essential before you begin your buy to let journey. With property investment, UK cities attract tenant demand from a range of different renters. Before you put your property on the market, you should think about the type of tenant that’s likely to be interested in the investment as this will allow you to tailor the design and amenities towards them.

For instance, you might view student property as one of the best type of properties for a property investment strategy in the UK, in which case the obvious resident will be student tenants. To give yourself the best chance at success, however, you should pay attention to special details that could help your property stand out to this tenant. If you researched the student market in the UK, you’d find that students favour qualities like proximity to their university campus, high-speed internet, and modern designs and furnishings. Other luxury amenities like an onsite gym or round-the-clock security and maintenance are also desirable. By knowing this information about your target tenant, you can take your property investment strategy to the next level and offer attractive qualities that your competitors may be lacking.

Before you even start your property investment strategy, you should already have an exit plan in mind. Your exit strategy is an important part of your journey when investing in property in the UK, and without it you could be limiting your investment potential. So how do you create an exit strategy?

Think about how long you imagine investing for, how you plan to leave your investment, and who your ideal buyer would be. For example, you may wish to invest for the longest period of time possible so that you can generate many years worth of rental returns. Then, when the market is right, you’ll think about selling the property to benefit from capital appreciation. Alternatively, you may wish to hold onto the property and pass it on to a loved one rather than using any income from the sale towards your retirement. Be sure to spend time thinking about this, especially if you intend to build a wider property portfolio as it’s a good idea to know when and how you expect to exit each investment – whether this will mean selling your properties all at once or gradually.

Find the Perfect Mix of Yields and Growth

Every soon to be investor needs to understand the basics of an effective property investment strategy. If it’s a buy to let strategy you opt for, you need to know about two key elements of an effective strategy when investing in property in the UK – rental yields and capital growth. But as well as understanding these terms and knowing how to identify the best opportunities, you also need to realise that true property investment success comes from the right combination of the two.

When getting started with buy to let and exploring property investment options, it can be easy to get sucked in by impressive rental yields and low prices. While yields are definitely a big element of all good property investment strategies, you could be limiting your chances of success by focusing solely on this figure.

An investor who buys a residential flat in an affordable area of a city, for instance, could reel in some impressive yields if the property price was low and levels of demand are high. This is all well and good in terms of rental returns, but if the area the flat is based in is run-down with no signs of growth or regeneration, you’re missing out on your potential for capital growth and a rise in property values. By the time you come to sell the property, you could find that the market value has seen little change, or may have even dropped.

Every property investment strategy in the UK should factor in capital growth along with yields when selecting an investment type. Without doing this, you won’t benefit from the ability to make money from both rental returns and an increase in value when you choose to sell. Successful property investors will look at every way to make a return on investment to get the most out of their UK property investments with regular returns and capital gains. This way, investors using a buy to let mortgage to pay for their property can make enough to cover the repayments along with having the option to pay off the remainder of the property when they come to sell.

Think About your Tenant

Once you’ve chosen a property investment strategy, you’ll have a good idea of the type of tenant who you should rent your property out to. Understanding your tenant profile is so essential before you begin your buy to let journey. With property investment, UK cities attract tenant demand from a range of different renters. Before you put your property on the market, you should think about the type of tenant that’s likely to be interested in the investment as this will allow you to tailor the design and amenities towards them.

For instance, you might view student property as one of the best type of properties for a property investment strategy in the UK, in which case the obvious resident will be student tenants. To give yourself the best chance at success, however, you should pay attention to special details that could help your property stand out to this tenant. If you researched the student market in the UK, you’d find that students favour qualities like proximity to their university campus, high-speed internet, and modern designs and furnishings. Other luxury amenities like an onsite gym or round-the-clock security and maintenance are also desirable. By knowing this information about your target tenant, you can take your property investment strategy to the next level and offer attractive qualities that your competitors may be lacking.

Plan an Exit Strategy

Before you even start your property investment strategy, you should already have an exit plan in mind. Your exit strategy is an important part of your journey when investing in property in the UK, and without it you could be limiting your investment potential. So how do you create an exit strategy?

Think about how long you imagine investing for, how you plan to leave your investment, and who your ideal buyer would be. For example, you may wish to invest for the longest period of time possible so that you can generate many years worth of rental returns. Then, when the market is right, you’ll think about selling the property to benefit from capital appreciation. Alternatively, you may wish to hold onto the property and pass it on to a loved one rather than using any income from the sale towards your retirement. Be sure to spend time thinking about this, especially if you intend to build a wider property portfolio as it’s a good idea to know when and how you expect to exit each investment – whether this will mean selling your properties all at once or gradually.

If you’re ready to buy an investment property and you’re set on a buy to let investing strategy, make sure you explore our investment opportunities. We’re a Liverpool based property investment company who specialise in residential and student buy to let properties in the North West, offering some great buy to let options. If you want to get started in property, or have any questions, please contact us today and one of our property experts can provide information on our available propertes to help you build your perfect investment strategy.

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