Top 10 Property Investment Strategies You Should Consider in the UK (With Pros and Cons for 2024)

As far as rental properties go, single let is likely the most traditional and easy-to-understand example of property strategies UK.

A single-let residential property is real estate that is rented to a single ‘tenant’, which can be an individual person or an entire family.

Single-let residential property has been long considered the best property investment strategy in the UK for two main reasons.

• Rental Income – Those property investing can earn monthly rent each month, which recently reached an all-time high of £1,199 PCM in the residential UK market.
• Long-Term Growth – Despite the economic pressures seen at the end of 2022, UK property prices have increased by 5.52% in the last 12 months, according to the Land Registry, which is set to increase by a further 6.2% by 2027 according to predictions from Savills.

For these reasons, you can expect a lucrative strategy when buying property. Be sure to check out our full guide to single-let buy-to-let property to learn more information about this top house investment strategy.

Top Tip: To make the most out of your buy-to-let property investment and become a successful investor, be sure to focus on areas with a high young professional population as they are the age group most likely to rent for the foreseeable future. This is because younger people are more drawn to renting, whether through choice or lack of financial ability to purchase a home of their own.

Pros

• With residential property in huge demand, looking at tenanted properties for sale in the UK can offer a less risky buy-to-let strategy.
• Easy to get started without expert knowledge.
• Allows investors to make consistent rental income, with high rental yields available in certain UK areas.
• Generates two types of returns through a combination of rental returns and capital growth returns when the investor sells the property.
• Less time-consuming than some other rental property investment strategies, with the option to hire a rental management company for a hands-off investment.

Cons

• Residential buy-to-let is a long-term investment strategy, so not the best choice for those looking to quickly make significant short-term returns.
• Potential void periods if investing in an area without high rental demand.

A top choice for any property portfolio, an HMO is another excellent example of top property strategies UK.

An HMO, otherwise known as a house of multiple occupancy, is real estate that is rented out to multiple tenants who each pay rent and have shared facilities like a bathroom and kitchen.

Certain types of student accommodation fall under the category of an HMO, with shared student houses being an alternative to purpose-built student accommodation.

HMOs have fallen in popularity amongst students in recent years, who are opting to live in higher-quality accommodation that can’t be provided by HMOs that tend to be older buildings.

So, while a property investor can earn some huge returns on the HMO property market, it’s likely no longer the best property investment strategy to target students.

You can learn more about HMOs and other student investments by reading our guide to how to invest in student property.

Pros

• Offers the chance to generate income from multiple different tenants at once, resulting in high yields.
• If one tenant stops paying their rent, you’ll still have rental income from the other tenants to fall back on.

Cons

• This type of investment strategy comes with more complex tax rules, planning requirements, and legislation requirements.
• Difficult to obtain a buy-to-let mortgage for HMO properties.
• More management is involved, which makes this property investment strategy more time-consuming.
• As the demand for more luxury private accommodation increases, people may be less inclined to rent shared properties.

When it comes to property strategies UK and property investment ideas, an effective choice in 2022 is commercial buy-to-let.

Here, an investor will purchase a commercial building, which can include an office block or retail space, and rent it out exclusively to companies and business owners.

While investors may struggle to find sellers for commercial property, commercial buildings tend to have longer lease periods than traditional buy-to-let, making it easier to secure a long-term tenant and get a consistent cash flow.

However, commercial property can be hit heavily in times of economic struggle like the financial crisis, something that a potential property investor should keep in mind before they decide to choose this alternative property investment to traditional buy-to-let.

Pros

• Lease lengths for commercial buy-to-let tend to be longer than residential buy-to-let property investment strategies.
• There are certain tax advantages involved.

Cons

• Finding the right tenant can take a long time, meaning more extended void periods in between tenants.
• Buy-to-let mortgages can be more costly compared to residential buy-to-let.
• In times of recession or economic uncertainty, the commercial property market tends to be hit hard.

If you’re looking for alternative property investments UK, hotel lets are an incredibly niche investment strategy you likely may not have thought of when considering a rental property investment strategy.

Hotel room investments are when an investor purchases a room within a hotel and generates income from guest stays.

Instead of having a full-time tenant like other buy-to-let strategies, an investor will gain income from those travelling for business or a holiday.

Hotel lets are ideal for UK investors who want a completely hands-off investment when investing in property.

Pros

• It can be possible to make large returns if the hotel is popular and generates a lot of demand.
• A hands-off strategy with no need to deal with tenants.

Cons

• Because a hotel is essentially a business, you’re at risk of the hotel failing, damaging your investment.
• If the hotel doesn’t see a lot of demand, you will lose income due to void periods.
• The hotel’s reputation is out of your control, and bad customer reviews could impact demand.

For investment ideas UK, rent-to-rent can be an effective and little-known strategy that can get you on the property ladder without paying a huge price tag.

Rent-to-rent is when an investor rents a property from a landlord and then rents it out to a tenant.

The investor who rents out the property from the landlord has the responsibility of finding tenants, maintaining the property, and paying property bills, while the regular rental costs that the investor is required to pay will usually be discounted to allow them to make a profit.

Pros

• Quick to get started with and begin generating income.
• Doesn’t require the purchase of a property.

Cons

• The number of landlords who will agree to this arrangement is limited.
• Limited returns compared to other property investment strategies.
• No ability to make returns through capital growth.

To work out which of these investment strategies is right for you, you need to think about what you want to get out of your property investment project.

Ask yourself the following questions when contemplating a property investment strategy:

• Are you focused on making regular returns from rental income, a large sum of money from a property sale, or both?
• How much risk are you prepared to accept with your investment?
• Is the property investment strategy you’re interested in capable of generating a high influx of demand?
• Do you want a long-term property investment or do you want quicker short term returns?

If you want the best type of property investment, a buy to let strategy will likely be your best choice.

This is because buy to let strategies, most notably residential and student buy to let, can offer two types of return on investment – rental returns and capital growth.

However, if you’re more focused on making a lump sum of money rather than a long-term cash flow, then property investment strategies like buy to sell may be better suited to your needs.

To fully understand which property investment strategy is right for you, it may be a good idea to speak to a financial advisor who can provide clarity on what each investment strategy involves.

Nobody should ever enter an investment without knowing what to expect. When it comes to property investment strategies, this means learning about all of the fees and payments involved with investing in property.

While you have the cost of the property itself to consider, you also need to be prepared for the following expenses:

• Property taxes like stamp duty tax.
• Property management fees.
• Rental property insurance.
• Ground rent (if you purchase a leasehold property).
• Property maintenance costs.
• Other applicable fees.

This is why so many investors believe that setting a budget is such an essential part of every property investment strategy.

Whether you have a budget of £50k or £500k, you’re still perfectly able to find a lucrative investment property. You just need to be prepared for the costs and fees involved so that you can budget accordingly.

Learn more about how much money you need to invest in property by reading our updated 2024 guide.

You also need to factor in your responsibilities if you choose to become a landlord. Click the following link to learn more about landlord responsibilities with references to safety, housing benefit tenants and everything you need to know about energy efficiency.

Before you even start your property investment strategy, you should already have an exit plan in mind.

Your exit strategy is an integral part of your journey when investing in property in the UK. 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 possible so that you can generate many years worth of rental returns.

Then, when the market is booming, you’ll think about selling the property to benefit from capital appreciation.

Be sure to spend time thinking about this, especially if you intend to build a wider property portfolio.