How to invest in property in the UK

Investing in property is one of the best ways to start planning for your future.

Whether you’re looking to buy to let or to buy property speculatively with the intention of selling it, property is one of the most popular sectors for investment.

Why invest in property?

While any investment is designed to return profits to the investor, property is one of the most attractive investments.

If you’re buying to let, you could earn passive income over a long period far exceeding the initial outlay, making this an attractive option.

While house prices are expected to fall this year, Savills believes they will rise 20% between 2025 and 2028. 

What kinds of property investments are there?

When it comes to the property market, there are a few different options open to you:  

Buy-to-let

A buy-to-let means you purchase a property and then rent it out to a tenant, meaning that over the long term, you will almost certainly earn more on your investment.

Property development

Investing in property development means that you put your money into an old property or building in the hopes of modernising it and then selling it for a profit. 

Buying a new build

You could buy a new build fresh from completion and look to sell that on for a profit – potentially having redecorated or redesigned it.

A property investment trust

A property trust is a way of pooling funds to invest with greater leverage.

A fund may choose to invest in property directly or instead in construction companies or potentially even property bonds. 

Property crowdfunding

Property crowdfunding platforms allow you to pool your funds with other investors to invest in a buy-to-let property.

The fees can be high, and your funds can be locked up for a long time, so seek expert financial advice before exploring this route.

How to get started in property investment

Investing in property can be an easy and often profitable decision, with all the options listed above opening up different avenues for you.

If you’re looking to take on a more intensive project, consider buying a property in the early stage of its construction or refurbishing a project from scratch.

These are good opportunities to add value to a property. For example, you could add new, modern features that boost its value.

Alternatively, investing in a fund or owning a buy-to-let will allow you to take more of a backseat, with much of your money either managed by someone else or otherwise ticking over.  

Your property investments don’t need to be homes, either.

You could invest in industrial properties, such as warehouses, commercial properties, such as offices, or any other kind of building.

While you will likely be limited by your budget, a property investment can be anything from an office building to a residential home.  

Where are the best places to invest in property in the UK?

Prime locations to invest in property include London, the South East, and major cities like Manchester, Liverpool, Birmingham, Leeds, and Bristol.

London offers strong rental demand and capital growth potential despite high prices. Commuter towns near London can also provide solid returns.

Northern cities present affordable options with regeneration schemes boosting growth.

Other smart picks are university towns which have young tenant populations.

Key factors to consider when choosing an area to invest in include:

• Jobs and business growth
• Infrastructure projects
• Demographic trends that indicate an area's investment prospects

Consulting a local estate agent can help you identify up-and-coming neighbourhoods with development potential.

A savvy property investment in a strong location can deliver stable long-term returns.

How much money do you need to start investing in property?

The amount of money you need to invest in property depends on what type of property you want to buy, but a rough estimate is that you'd need at least £30,000 to start investing in lower-priced properties.

Some properties, like houses or flats, can be purchased with a mortgage. This means you pay a deposit upfront and the rest over time in monthly repayments. This leads to a lower initial cost.

Other properties, such as land, require the full purchase price paid in cash upfront.

On top of the purchase price, there are one-time fees to factor in when budgeting your investment amount such as stamp duty, legal and valuation fees.

And after purchasing, there will be ongoing costs to consider as part of owning the property.

These include mortgage repayments if you have a loan, as well as costs like ground rent and service charges for flats. Maintenance and improvement costs may also apply.

It's wise to research property prices in your chosen area and understand all the potential costs involved.

This will help determine the total investment amount needed and ensure your property purchase goes smoothly.

What is a good return on investment for property in the UK?

A good target for a return on investment (ROI) from property in the UK is around 5%-7%.

Of course, this can vary depending on where you buy. For instance, returns in London may be lower than in other parts of the country.

Many factors can impact your rental income and overall returns. It's important to research potential risks and rewards before deciding to invest.

Location, property type, tenant demand and more can all affect your profit. But with the right property in the right area, real estate investment can be a good way to generate extra earnings.

The key is going in with realistic expectations.

While returns of 5%-7% are feasible, nothing is guaranteed. But with the right due diligence, you can ensure your investment goes smoothly.

How to manage your property investment

Managing an investment means making sure that you can afford the expenditures needed to buy a property and having a good idea of what level of investment risk you are comfortable taking on.   

First, consider how you will finance the purchase of your property.

If you are developing a building or hoping to make minor adjustments before selling it again, you may be better off with a short-term financial loan that sees you through the renovation of a property and selling it.

If you’re looking to buy-to-let, on the other hand, you will need a buy-to-let mortgage.

This mortgage takes into account your circumstances, such as how much rent you could potentially earn from the property.

You should also be aware that while there are many reasons to invest in property, and it is broadly one of the safer investments you can make, no investment comes without additional risks.

Assess whether you are comfortable taking on more risk and what investment limits you need to set yourself.  

How to spot a property money pit

Renovating a property can be a great way to earn a return on your investment, but it can also come with complications.

Hidden costs can cost hundreds, even thousands, of pounds if not detected early.

On top of this, late or important structural work will need extra manpower and potentially specialist equipment, meaning that your costs can very quickly snowball into a difficult situation.  

If you’re surveying a property, make sure you pay close attention to: 

• Signs of damp
• Subsidence
• Any structural work needed
• Administrative costs 
• Labour costs 

Is property a better investment than stocks?

There are pros and cons to both property and stocks as investments.

Property can generate rental income and benefit from capital appreciation over time.

However, it also requires hands-on management, is illiquid, and carries risks like maintenance costs.

Stocks offer passive income through dividends and growth potential but are more volatile in the short term.

While past data shows UK property outperforming stocks, future returns may differ.

Consider your investment timeline, risk tolerance and diversification goals when deciding between the two.

Many advise allocating to both real estate and equities for balanced portfolios.

How can a financial adviser help?

Investing in property can help you start planning for your financial future and independence.

Whether you’re looking to buy-to-let or invest in a property to sell, having the right financial advice is crucial when making the right decision. 

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