Introduction to Property Investment Strategies
Ask any property investment company and they’ll tell you that one of the most important things to consider, if not the most important thing, is a strategy. You need to have a clear plan of where you’re going and what you’re looking to achieve.
At its most fundamental level, there are only two property investment strategies. You buy a property and rent it out or you buy a property and sell it on for profit. That’s it. The thing is, if you scratch just below the surface, it gets a lot more complex. If you want to start seeing serious success, you need to look deeper.
It’s difficult to quantify the perfect property investment strategy for you. Everyone is different and everyone will invariably have different measures of success. What we can do is give you some inspiration, tell you some common property investment strategies and how you can adapt them to fit your short-term, mid-term and long-term goals. Property investment, as with any investment, comes with risks. Here we explore all of the options when building an investment strategy including the pros and cons.
Stunning Off-Plan Investment Opportunity
- Off-plan apartments – estimated completion 2023
- City-centre location just 3 minutes from Brindleyplace
- Unique waterfront living in Birmingham
- 24.5% price growth expected by 2026 (JLL)
- Top location for London leavers – forecasting yields above 5%
What is a Single Let Property?
A single let property is where you have a house or apartment that you let out to a single tenant – whether that’s a family or an individual. Single let properties are one of the most common buy-to-let investment assets because they’re relatively simple to get up and running.
First, find the perfect location. Second, find the ideal tenant. Third, do the maths and ensure that everything adds up. Fourth, keep the tenant happy and ensure a consistent stream of rental income.
In terms of tenants, you’ll commonly be looking at families and working professionals. This is especially true if you’re investing in a city-centre property such as Lockside Wharf, where workers want to be near the office and desirable amenities.
Investing in a single let property is popular because its one of the most simple ways to get into the property investment market. There’s a lot to be said for the classics and many landlords earn excellent returns by having a portfolio of single let investment properties.
Tips: Location is a vital indicator of success. By finding a great location, you improve the chances of finding a happy, motivated tenant, you can ensure a great rental income and if the area is up-and-coming, positive capital growth is never far behind.
What is HMO Investing?
A house in multiple occupation (HMO), sometimes known as a house share, is a property investment where each room is rented out to an individual tenant.
As you’d imagine, HMO’s are popular as they allow for higher rental income. A bigger property can have rooms converted into bedrooms, creating the potential for more tenants and thus more money.
Unfortunately, a by-product of more tenants is more time spent managing the property. There’s also the potential for more wear and tear. The more tenants, the higher the chance the property may need maintenance down the line.
That said, the higher rental yields mean this type of buy-to-let has grown in popularity over the last few years, especially in the capital and larger regional cities.
Quick investment tip for HMO property investments: Most HMO’s are let furnished and usually have bills included to avoid any confusion. Consider this if you’re looking at this investment strategy.
What is a Student Property?
A student property investment is basically a house in multiple occupation aimed solely at student tenants. As far as buy-to-let property investment strategies go, this is similar to a single-let or HMO but focuses on a completely different market.
Many investors choose a student property investment because it will typically have a predictable, consistent stream of rental income.
Management is generally easier as landlords know that each tenant will be signing up for a certain period of time and they’ll always be a stream of new students to take their place.
If you buy into popular stereotypes, the idea of housing several students may turn you away, but the potential for income is considerable.
Quick investment tip for student property investment: Invest in student hotspots. Ensure you have long-term demand as voids on student property can hurt your bank balance.
Want to know more about the UK property market for 2022? Download the UK Investment Guide today and discover everything you need to know about UK property investment in the new year. In this guide you’ll find:
- Current market performance
- Forecasts for the UK property market in 2022
- Key trends impacting the market
- Best places to invest in 2022
What is Off-Plan Property?
An off-plan property investment is the purchase of a residential property that has not been built yet. Off-plan properties are new-build developments that are not ready for tenants and bought prior to completion. This type of investment is popular because of three main reasons:
There’s potential for capital growth between purchase and completion, the opportunity to buy at a lower initial cost than if the property was completed and the fact that it’s a guaranteed new development.
As an investor, you would buy a property unfinished, wait for completion, research the market and decide whether to rent or sell. This offers flexibility in strategy, although it requires a lot of management and due diligence.
As always, growth isn’t guaranteed. Investing in off-plan property is entirely dependent on the market, particularly if you’re hoping for capital growth during the build period. Be sure to research the area and the market conditions before diving in.
Quick investment tip for off-plan property: Get in early and snap up the best units.
What is a Buy-to-Sell Strategy?
Flipping a property is simply buying a house or apartment, renovating it quickly and selling it for a profit. In terms of property investment strategies, this is completely different to buy-to-let. Here investors will not rely on rental yields or long-term growth, choosing instead to focus on short-term gains.
The main attraction of buy-to-sell is the amount of money that can be made quickly. You can buy and sell in a matter of months rather than the long-term timeframe that comes with a buy-to-let strategy.
This is also the downside of ‘flipping property’. This type of investment only makes money when you’re working. There’s no passive income, just the money you make on the sale.
The most important things to keep in mind when looking at buy-to-sell is location and budget. You need to ensure that you buy at the right price, in the right place and keep any refurbishments or maintenance within your budget.
Quick investment tip for flipping property: Run all the numbers in advance. Don’t get caught out with hidden costs with means delaying the flip.
What is a REIT?
A real estate investment trust (REIT) is a company that finances, manages and owns real estate with the purpose of generating returns.
Following a mutual funds model, a REIT allows individual investors to earn dividends from real estate investments without financing them upfront and requires no management.
A REIT is traded in a very similar way to typical stocks and shares, leaving investors to adopt a buy or sell position.
REITs are useful for investors that want a shorter-term investment, because while they offer shorter returns than a traditional investment, they’re very liquid.
Quick investment tip for REIT investing: Find a fund that includes plenty of diverse assets to mitigate your risk.