Best Property Investment Strategy In The UK (Proven Strategy)
Property investments might sound straight and simple in the beginning but once you venture into it, it will make you realize how difficult few aspects can be. Moreover, the overseas investment can be a bit more complex as you cannot stay on spot to absorb the deciding factors to drive investment. Also, the strategies for different regions vary and you cannot simply copy an idea and expect it to yield your returns. Property investment strategies for the UK are quite straightforward and logical, knowledge of which is quite necessary for you before you start the investments.
So below, we have shared 5 exclusive strategies that will help you hit the bull’s eye fastest and without wasting your time. These strategies will also help you to hold back your cash from wastage and will prevent your attention from swaying towards under-performing assets and help you focus on the lucrative ones.
Here are the 5 most crucial elements of the property investment strategies for the UK:
- Don’t rely on just discounts
- Analyse the rental yield map
- Understand the target tenant’s profile
- Use maximum leverage
- Formulate an exit strategy
Don’t Rely on Just Discounts
Buying properties at enormous discounts seems a lot lucrative until you realise how better of a deal you missed upon. Buying houses at above 30% discounts might seem the best-cracked deal in the beginning, but in the end, it might pose to be the worst-performing asset under your investment portfolio. Normally, houses are sold off with such discounts where additional maintenance work is required in large chunks or where the tenant profile is below what you have planned them to be. There are 7 golden rules of investment that need to be applied every time a property is acquired and this is also an important aspect of the property investment strategies for the UK.
These are the 7 rules that teach you do not acquire any property below market value (BMV) or an individual need to incur recurring losses till the property is withheld.
- Knowing the area- A perfect area would be the one that has a balanced mix of homeowners and tenants. The balance will create a healthy demand that will raise house prices and maintain rental rates.
- Knowing the tenant profile- There are various profiles that you might want to consider before renting like local house rents, student rents, working professional rents, single or multi-let the property. Each profile would yield differently and likewise; you can plan your finances.
- Calculating rental yield- After knowing which tenant is right for you, you can then calculate the rental yield annually from them. Single let properties can yield a minimum of 8% and a multi-let property will yield a minimum of 12%.
- Potential for capital growth- This can be understood by assessing the supply of properties in the adjacent areas and how strong is the population growth. If the demand rises faster than the supply, only then will your capital appreciate quickly.
- Exit strategy plans- This is something you plan before investment and includes a secondary plan to save the situation if things do not go as planned.
- Value addition- A ready to acquire property will save your time but a property having a small refurbishment can add an immense end value to it. Your return on investment can too rise significantly.
- Discounts- Dealing with properties that can have discounts despite the need can improve your rental returns and also prove to be an equity buffer in cases of change in prices.
Analyse the Rental Yield Map
Irrespective of the fact that you invest for rental incomes or capital growth, it is necessary for you to understand how rental yields can affect your portfolio and this is an important property investment strategy for the UK. This figure is achieved by dividing the total property investment by the total gross yearly income from the rents. The value achieved will help you understand if the rental returns are going to cover your mortgage costs, maintenance, and management costs as well as the insurance. You need to also consider the dead times where there won’t be any returns and your previously calculated returns must be able to suffice these voids.
So what is it that I should be looking for as an investor? It is ideal to look for and settle for properties that yield a minimum of 8% and above for single-let tenants and 12% and above for multi-let tenants. This is how I will be able to ensure that my returns cover the day-to-day running costs of my investment.
Understand the Target Tenant’s Profile
There are many profiles that you might want to consider as your tenants, and there are different sets of benefits attached with every tenant set.
- Working tenants- This set of a profile is a lot more reliable for investors for their abilities to pay rent on time. They are also referred by their employers who guarantee their returns. But they are sometimes a lot demanding when the amenities of the properties are brought to question.
- Housing allowance tenants- This is a set of tenant profile that investors tend to avoid. They do not have fixed income or assets and need to be chased after for rents. But they have the advantage of staying longer in the properties and are less demanding of the amenities.
But who will be the right tenant for your property?
The right and ideal tenant profile will depend on your investment goals. It also depends on how much of a hassle you are ready to bear with. Your investment goals, ROI, and mortgage value can estimate the best person you want your property to be rented with.
To help yourself more through this process, you can also ask a list of the following questions to streamline your preference:
- What is my personal preference of tenants as an investor? Does it matter which type of tenants I rent my property out to?
- Do I bear the experience to handle these tenants? Or do I mind consider having an agent who will wrap up the work on my behalf? Do I require specific agents to handle specific tenant profiles?
- How is this tenant profile going to affect my annual rental yield compared to the area I’m investing in now?
- How is this specific tenant profile going to affect my finance planning for my investment?
Use Maximum Leverage
Property investment stands out from other modes of business because it has the power to leverage your investment to the maximum potential. With the property investment strategies in the UK proliferating, there is now more to leveraging than accessing money with mortgages, commercial loans, or joint ventures. Being the owner and not the worker is the key. One might think that these chores might be saving you money but these are ultimately draining you out of a lot of time that you can otherwise invest in building your portfolio. In that time, you can instead find other growth yielding properties, evaluate them, negotiate the buying prices, file your paperwork for legalities, choose mortgages and insurances, refurbish existing properties, find and manage tenants, and the list is never-ending. For the tasks getting done seamlessly, you might consider finding the right team with tasks done efficiently and effectively. A trusted team is a way of leveraging your income the best way.
Formulate an Exit Strategy
The final of the property investment strategies in the UK is the formulation of an exit strategy even before you are thinking of acquiring any property. This is a step that needs to be proceeded with before you source your properties and that is a time you need to think about your end goals. There are a few questions that will make planning for this strategy easier.
- What is the most important thing you want to achieve from the properties you have invested in?
- How long is it that you want to invest in the property for?
- How do you consider exiting from this investment and who is likely to be your next buyer?
Answer to these questions will help you stand on an overall conclusion of your plans and goals and will ultimately help you plan your exit strategy. Before sourcing the property, you can also discuss and understand these questions from your seller to understand what their stance was on these pillars. This consultation will make way clearer for you.
The best way to utilise the property investment strategies for the UK is to understand and plan your goal. This is the only way that each of the 5 above-listed strategies will be put to act effectively without you having to worry about your exit strategy plans. This is a lot complex process and we have tried to simplify it as much as we could for your better understanding. You can split it into parts to understand every section better and move towards more successful property sourcing endeavours in the UK.