This comprehensive guide on UK property investment has been compiled by FJP Distribution, and it includes important insights on important aspects of the UK property market in 2023 and beyond. This guide tells you everything you need to know about buying investment homes, from how and why to the different things you need to think about.

What is meant by “property investing”?

Investing in real estate is a strategy that has helped many people achieve their financial objectives and increase their income by acquiring and maintaining ownership of properties that generate passive income in the form of rent. Profits for real estate investors can come from a variety of sources, including monthly rent payments, capital gains from selling the property, or a combination of these.

What is meant by an investment property?

To put it simply, an investment property is a property bought with the intention of increasing the buyer’s wealth. This property generates revenue through rent and/or appreciation of its value (sometimes called “capital growth” or “capital appreciation”). A single individual, a group of people, or a business can hold and oversee investment properties.

What are the kinds or property available to investors?

As a property investor or someone interested in becoming a property investment agent, it’s important to be aware of the different types of property there are to invest in and so you should do some research about the various sorts of real estate investments before making any commitments.

Some of the most common investments in the UK real estate market are:

• Residential buy-to-let real estate.
• Student buy-to-let properties.
• Buy-to-let properties that are off-plan (sold before they have been built).
• Commercial real estate (e.g., retail units, office blocks)
• Properties purchased with the intent of selling them (also known as property development or property flipping).
• House in multiple occupation (HMO) properties.
• Holiday lets (short-term rentals for vacations).

The buy-to-let investment approach is what you’ll use if you want to become a landlord and own rental property. Nonetheless, investors should give some thought to what sort of investment property they want to acquire and rent out.

The alternative is to not put money into any of the types of property investments mentioned above but rather learn about other real estate investment strategies, such as real estate investment trusts (Real Estate Investment Trusts).

Does It Make Sense to Invest in Property?

Why are so many investors attracted to UK property?

There are several advantages to purchasing UK real estate in 2022 and beyond. Among the many advantages of purchasing property in the United Kingdom are:

• Profits from both rental income and appreciation of value can be substantial.
• A diversified portfolio can be achieved.
• Multiple investing strategies are available to you.
• Compared to the stock market and other forms of investing, investing in real estate carries a relatively low level of risk.

During 2021/22, the media talked a lot about how the UK real estate market continued to grow.

It is a perfect moment to invest and take advantage of the low pricing and high returns because huge capital appreciation is projected over the next few years.

Could property be the best investment option?

Investing in any asset might seem intimidating if you’re wary about committing a large sum of money to something you don’t understand very well.

It’s natural to ask if real estate is the best place to put your money and wonder whether you might be doing better with your hard-earned money in something like retirement funds or elsewhere.

However, there are significant reasons why real estate is so popular among investors:

• Investing in real estate is seen as a tangible asset and is considered to be safer than investing in stocks and other forms of financial market volatility.
• With the help of a property management company, business owners who invest in real estate can focus on other parts of their business while still getting the financial benefits of renting out property.
• People who want to make sure they have enough money for the long term and get a head start on retirement might think about buying property.

Were rentals still a good investment in 2021/22?

If you are thinking about whether or not to invest in rental homes, you may wonder if the risks are worth the rewards.

Among the numerous possible motivations for investing in real estate is the prospect of financial gain by increasing one’s income.

If you want to boost your income and generate more money, was it a good idea to invest in a rental property in 2021 or 2022?

There is unprecedented demand in the UK rental market right now. However, home values as a whole are now almost 10% higher than they were a year ago.

Is it wise to put money into real estate?

An investment in real estate is something you should consider doing if you have the means to do so. Having said this, only the individual can make the choice to invest in real estate and start working their way up the property ladder.

If you’re looking for a way to diversify your portfolio and earn significant returns, buy-to-let homes are worth considering as an option in order to achieve this.

Factors to Think About Before Buying an Investment Property

Is property investing affordable for me?

You may want to get started on the buy-to-let property investment ladder, but you may be thinking, “What if you don’t have the money to make the initial purchase?”

Before making any type of investment, consider whether you have access to acquire or the necessary funds on hand.

In the diverse UK property market, property prices differ widely, so buyers with varying amounts of cash on hand may usually find something that works for them. Some factors affecting the cost-effectiveness of real estate investments are outlined below.

Give careful thought to funding

When financing an investment property purchase, a buy-to-let mortgage is typically used by investors. These types of mortgages make it possible for purchasers to put down deposits and make monthly mortgage payments that are often covered by rental revenue – plus profit.

Depending on the lender, a down payment of at least 25% of the purchase price is typically required. Of course, each lender is different, and their requirements will change as the economy fluctuates and their risk assessment changes.

Many real estate investors, especially those who don’t want to deal with trying to locate mortgage lenders and staying current on their payments, are fortunate enough to opt to pay cash for their investments. This will also negate the need to pay interest on the mortgage, which is something that is currently a bit of a hot topic as rates rise.

Some real estate companies selling apartments off-plan also provide financing in the form of instalment plans. This type of payment plan can be a good way for some investors to enter the property investment market.

Keep taxes in mind

There are certain taxes that all investors should be aware of, regardless of whether they are purchasing a standard buy-to-let home, a commercial property, or a house of multiple occupancy.

Taxes, such as those on stamp duty and income, may add up rapidly and should be accounted for in your property budget.

What to look for in a good rental property investment

There are a few factors you should keep in mind while choosing a rental property for your portfolio. Not all potential buy-to-let properties are created equally, and so it’s a good idea to be mindful of what constitutes a good investment property.

An investment property should be within your price range and provide sufficient rental income to cover your costs and allow for a profit.

To that end, make sure your rental property has:

• Excellent rental returns to provide financial security.
• The property is located where UK property prices are expected to rise significantly to maximise your potential capital growth profits.
• High demand from young professionals and students to rent homes cuts down on vacancies and encourages renters to stay for the long term.

Locating houses that meet these criteria is crucial, so you’ll need to do some more reading on the topic if you are a little unclear about this. But once you have got to grips with this essential element in property investing, it’s just a matter of reporting this strategy for other properties.

Is it possible for you to live in an investment property?

You may be asking yourself if you can live in your rental property before renting it out or selling it for a profit on the appreciation of its value. This is a question that arises from time-to-time as investors wonder about what they can do with the property that was purchased using a buy-to-let mortgage.

Keep in mind that if you have a buy-to-let mortgage to finance the purchase of your home, you are not permitted to live there yourself since this would contravene the mortgage terms.

However, if you paid cash for the house, you are free to stay as long as you want. Of course, if you do this, then you will not be receiving any rental income.

Can first-time homebuyers purchase an investment property?

Although most people will be homeowners before considering a buy-to-let venture, some people do make their first property purchase specifically for the purpose of renting it out.

Is it, however, a sensible strategy to do this? To this end, some will ask if it smarter to delay homeownership in order to save money for an investment property or to become a homeowner first.

As with anything, there are advantages and disadvantages to doing this.

The advantages are:

• It can allow you to grow your income and save so that you can afford a nicer house when you finally buy one.
• Stamp duty reductions and other tax breaks.

Among the drawbacks are:

• Many lenders are wary of giving a buy-to-let loan to a first-time buyer. This could make it harder to get a mortgage.
• There is no guarantee that a good cash flow would result from renting a house in addition to owning an investment property.

Investing the proceeds from the sale of your home

If you’re thinking of selling your own home, you may be wondering about using the proceeds to fund a buy-to-let investment. So, once you’ve sold your home, but what exactly should you do with the profits you have made?

Currently, a historic number of homes are selling for more than their asking price. This has been the trend for several years now. Homeowners who decide to sell their residence typically either move up to a more costly home or purchase a smaller home with the proceeds and put the difference in savings or investments.

According to the Office for National Statistics

• The average UK house price was £286,000 in June 2022, which is £20,000 higher than this time last year.
• Average house prices increased over the year in England to £305,000 (7.3%), in Wales to £213,000 (8.6%), in Scotland to £192,000 (11.6%) and in Northern Ireland to £169,000 (9.6%).

Investing in real estate is a terrific way to make use of the money you have left over after paying for your next house.

I am new to property investing, so what is the best way to get started?

Starting Out in Real Estate Investment

If you’re just getting started with real estate and are considering making an investment in this potentially profitable asset, here are some things to bear in mind as you plan out how to go about it:

• Think about and write down your specific investing goals and work out what you want to accomplish by investing in real estate.
• Pick a tactic for managing your rental property: Is your focus or interest in the student or residential buy-to-let market? Invest with the intention of reselling? (Sometimes called “flipping”) Or maybe you have a different investment path in mind?
• Research and make sure you fully understand what costs you will have to meet. Familiarise yourself with what it takes financially to own a rental property, including taxes, maintenance fees, and if you decide to hire help, what the cost will be to use a property management company.
• Learn what your financial choices are in funding the investment. Have you considered getting a buy-to-let mortgage to finance your investment? Can you get the cash together for an outright purchase, perhaps going in with others?
• One option to consider is employing a lettings property agent. This is an ideal option for hands-off investing. If this is your preference, hiring a property manager is a good idea.
• Prioritize capital appreciation and rental income. Do you realise that good returns depend on both rental yields and capital growth? Are you seeking one over the other or a combination of the two?
• Think carefully about where you should purchase the property. This involves researching the market and seeing where there is the most potential for short-term and long-term growth.
• When starting an investment portfolio, start off small and build from there. Would you like to start a real estate investment portfolio? Then it’s recommended that you begin with a little investment and work your way up.
• Off-plan investing can potentially help you save money and reap lucrative returns. Would you like to maximise your return on investment while minimising costs? Off-plan property investing is a good choice to consider.
• Consider partnering with a property investment company like FJP Investment. They can provide assistance and guidance with every step of the buying process, a direct line to the finest opportunities on the market, and access to the best deals.

Purchasing an investment property with others

Some investors may decide to look for a single partner or small group to split the cost of an investment property since it may be too costly to buy alone.

For people on a tighter financial budget, going into the buy-to-let business with a friend or family member may seem like a good idea, but there are also drawbacks you need to consider. First, the benefits:

• More money to put toward investments thanks to your combined income.
• The expertise of two investors working together, pooling their know-how and unique skills.

There are, however, certain drawbacks, such as:

• Relationship problems and misunderstandings are possible.
• If your partner(s) is unable to make mortgage payments, you will be responsible for the entire balance.