Guide to Property Investment in the UK

Understanding Budget

Getting an idea of a realistic budget is the first step to finding an ideal property. Typically, a buy-to-let deposit will be around 25% of the total purchase price. Therefore, if the property costs £100,000, the investor must have a £25,000 deposit. Furthermore, investors should keep in mind that they will need to factor in the stamp duty, legal fees, and any renovations or repairs that may be needed. Investors should certainly approach their budget with caution, as financial and life circumstances change.

If the investor is looking to make their first investment property purchase, they should consider looking in high-yielding areas where a property is available at a lower cost. Average property prices in London are over £550,000, whereas in Northern cities such as Manchester, average prices are around £250,000. This will help the investor gain experience in owning and managing their investment, while significantly lowering the risk.

Risk Appetite

Property investment is a far more stable investment type compared to stocks, cryptocurrency, or business investment. This is because the property market in the UK is strong and secure while having maintained long periods of growth. However, there is still an element of risk involved, so when an investor is looking to secure a property they must understand their own financial situation, the property market as a whole and what their goals are to fully understand the risks. If an investor cannot afford to pay for a vacant property, it may not be the best type of investment for them. Furthermore, if they cannot live without the liquid capital which will be used during the purchasing process, it could be considered an especially high-risk purchase.

Additionally, if the investor is financially stable but is in unstable employment, they may invest to gain a secondary income stream. However, if they stretch their budget to secure their property any changes to personal circumstances may leave them unable to pay to maintain the property or repayments. To combat this the investor may want to secure a property well within their budget, giving them the ability to rectify any issues.

Property Type

When finding a property, investors must decide on what type of property they would like to buy. Doing research to find the type of property that best suits a buyer’s investment goals. Apartments can offer a better value for money in popular BTL locations, such as city centres. Furthermore, they may offer higher EPC ratings, which can help benefit both landlords and tenants. In areas with high demand, rental prices can be incredibly high for apartments. However, investors buying off-plan may be able to secure property below market value.

Semi-detached and detached houses can be amongst the most expensive properties on the market and while high rental value can be achieved, the demand may be low. Additionally, securing a semi-detached or detached property may mean compromising on location, as these property types may not be available in city centre locations at a reasonable price. Furthermore, terraced houses have been popular with investors looking to invest in HMOs, however, in recent years new restrictions have been implemented to limit the number of HMOs in an area, making it a far riskier investment.