How to Invest in UK Property
Buying property is a low-risk investment that can give you significant long-term benefits.
The UK Market is especially promising due to high rental rates and growing house prices which guarantees higher profits for investors.
In this guide, we’ll tell you the steps on how to invest in Uk property in this favorable market and strategies you should consider when doing so.
How to buy an investment property in the UK (the step-by-step process)
Purchasing property can involve an overwhelming amount of legal work, handling inexperienced estate agents, and struggling with finding good deals.
In this section, we give you all the steps you need to take to ensure your purchase is stress-free and profitable.
If this is not your first property purchase you are free to keep on scrolling to the real estate investing strategies we recommend.
For the rest of you, let’s look at the process, note these steps may vary slightly but the idea is to give you a general overview of what to expect.
1. Plan your Mortgage
Make sure that you’re clear on your finances. Will you be buying the house out of pocket or taking a loan? If you need to take a loan i.e. a mortgage, make sure it is “agreed in principle”(AIP).
An AIP or DIP (Decision in Principle) is an assurance from your mortgage lender on the agreed amount of money he’d be willing to lend you.
It’s beneficial because you’ll know how much you’re able to spend. You’ll also be able to assure the real estate agent that you’re a serious buyer and not there to waste his time.
2. Talk to an Estate Agent
You want to talk to an agent as soon as possible so that you can build on your relationship early in the buying process.
Your estate agent will give you property suggestions which you can take your time and consider.
3. Select a Property
After considering all possible options, you can select a property that suits your requirements.
Book a viewing to see what the property is like in person. This will help you gauge whether you really want it or not.
4. Hire a Solicitor
A solicitor is responsible for dealing with all the legal work surrounding your purchase.
For example, he is the guy who checks if there may be some planning-related problems that might influence the house’s value.
5. Make an Offer
Once you select the property you want, you can make an offer to buy it. This is done either through a real estate agent or by directly contacting the seller.
6. Get A Survey
A surveyor will book you a survey of the property to assess if there are any structural problems with the property that may affect its value. If there are problems, you can renegotiate the price based on this.
7. Offer Accepted
Once the seller accepts your offer, your estate agent will prepare a memorandum of sale. He will also confirm the agreed price with all parties.
Conveyance is the official legal transfer of property from one party to another. In the conveyance process, your solicitor will carry out the necessary legal and administrative checks. He will also decide on a date for the exchanging of contracts.
9. Mortgage Valuation Report
A mortgage valuation report is needed before exchanging contracts. Once the mortgage provider obtains the report, a mortgage offer is dispatched to you and your solicitor to sign it.
10. Exchanging of Contracts
Once there are no problems with the title, the seller’s solicitor will send you the contract to sign. At this point, you can consult your solicitor and see if any amendments need to be made to it.
The contract should include necessary details like the price and conditions applying to the sale.
11. Completion of Sale
After signing the contracts, you must send money for the sale to the account of the solicitor who works for the seller at the stipulated date.
Once this is done you get official ownership of the property and are responsible to pay any outstanding mortgage and solicitor fees.
Congrats! You’ve made a successful purchase.
Is it worth investing in UK property?
UK property offers higher renting rates and capital appreciation. Making significant returns is a real possibility.
(image source: Finimize)
The following graph exhibits the predictions regarding the increase in property prices of significant regions in the UK from 2020-25.
(image source: Seven Capital)
In addition, South East UK and Birmingham have been predicted to face rental price increases of 11.5% and 12.5%, respectively, over the next four years.
On top of that, investing in property is a reliable source of income since these assets aren’t traded on an exchange, and thus daily swings in value don’t have much of an effect on them.
Can a foreigner invest in UK property?
Even if you don’t reside in the UK, you can still buy property. There have been many cases of foreign investment in the UK property market.
In 2016, there was a notable amount of foreign direct investment, with net flows increasing from 25.3 billion pounds to 145.6 billion pounds. During the first three months of 2019, 6.2% of all searches about UK property had come from international investors.
But as a foreign investor, there are a few more things you need to keep in mind. We’re listing these below:
- Make the payment in cash: We advise you to make the payment for the property in cash. This eases the process out for you.
- Understand the taxes involved: As a buyer, you won’t just pay the property price alone. Stamp duty tax, rental income tax, and capital gains tax are the taxes you need to know about.
- Hire a Property Management Company: When you’re sitting thousands of miles away from the UK, managing your property can be a bit of a hassle. Many foreign buyers will hire a management company to make this easier.
Can a foreigner get a loan on UK property?
Yes, but it is more complex and expensive for non-UK residents to get a loan. This is because it’s harder to prove to mortgage providers that you’ll be able to meet the payments. However, it can be made easier if you have a UK Bank account or a permanent job.
UK property investing strategies to consider
A property investment strategy outlines the way you choose to invest and your exit strategy even before you start looking for properties to buy.
This is because your exit strategy will determine which property you need to buy in the first place.
Remember, savvy investors, make money when they buy, not when they sell.
1. Buy to Let
As the name implies, buy to let mortgages are for people who wish to purchase property and then rent it out. The advantage is that you don’t need the experience to invest this way. You also get control over how much rent to charge.
Moreover, you get a constant flow of income. You can put the property to use while you wait for the value to rise. Then you can sell it to get maximum profit!
2. Buy, Refurb, and Sell (Fix & Flip)
You take a property selling for a below-market price, and you renovate it. Then you resell it at a price that covers those renovation expenses.
The advantage is that you get to make high profits quicker, and you gain experience regarding budgeting, construction, and the local estate market.
3. Buy, Refurb, Rent, Refinance, Repeat (BRRRR)
You buy property under market value, you refurb it, and then you rent it out.
Investing in Uk property with this strategy is excellent to build your wealth because you are not only buying a discounted asset (miss managed property that you can buy under market value).
You are also adding value to it by refurbing it and bringing it to its former glory. Now you can rent the property for top dollar in your area and your banks will be happy to use it as collateral for taking a refinance loan.
This allows you to leverage your money by renting it at a higher price than your mortgage payments, which will enable you to go out and repeat the process all over again.
How much money do I need to invest in UK property using each strategy?
There are many ways to invest in Uk property. In this section, we list the 3 most profitable strategies you can utilize to maximize your returns and reduce your risks.
For buy to let
You will need at least a 20% down payment plus all the associated closing cost expenses (3-5% of the purchase price on average).
Depending on which market you are investing in, this can land you anywhere between £20,000 and £50,000+ (we recommend sticking to medium-priced houses since they tend to offer better rental return rates than high-end properties -unless you plan to do short term rentals, of course-)
For flipping a property
The amount of cash you need will depend on how much you need to spend for renovations. Typically, this amount ranges between £5000-£10,000 for a light rehab of a small property all the way to £45,000-£90,000 for a complete gut rehab of a more extensive property.
The good news is you can get that cash from your money partners or bridging loans (at a pretty high-interest rate)
For the BRRRR strategy
The amount of cash you need is pretty similar to the flip; the only difference between these two is your exit strategy.
Keep in mind that buying a property in poor physical condition (ideal for these two methods) may hinder your ability to get a conventional loan.
You need to talk to your mortgage broker about it and see what type of loan you can secure for the specific property you intend to purchase.
If that doesn’t work, your best bet would be getting a private money partner or paying a higher interest rate to get a bridging loan.
Learning how to invest in UK property is a surefire way to have a long-term, stable source of profit. With increasing house prices and a favorable rental rate, the UK Property Market promises a lot to investors. Whether you choose to buy to let or sell at a higher price, we recommend starting here.
We hope this guide helps you understand how to invest in UK property, if you have any additional questions you can contact us directly. Share your experience with us in the comments!