Introduction

Investing in real estate can be a lucrative way for people to earn money, and it is one of the best ways to generate steady income and capital within a favourable time frame. For those who are just getting into property investments, it can feel slightly overwhelming as there are numerous factors to consider and even the most effective approach can fall apart without the right investment strategy. To have a solid understanding of how to invest in real estate the right way, this guide that is specifically tailored for newcomers in the field will break down the best ways to invest in the UK’s real estate market and the right strategies to maximise the returns on property investments.

How Do People Invest In The UK Real Estate Market?

Real estate investments in the UK come in many forms, each with its own distinct advantages and disadvantages. It is up to the investor to sort through everything and find a method that works for them. It is also worth noting that property investments give investors a chance to diversify their portfolio and provide a great hedge against inflation. Listed below are the most common methods on how to invest in real estate in the UK:

Buy-To-Let Properties

One of the most common investment strategies in the UK involves purchasing a property and then renting it out to tenants. The private rental sector remains robust, with average rents continuing to grow steadily across the UK, making this a testament to the rising demand for rental accommodation in the country—a number that is likely to continue rising in the coming years.

Buy-To-Sell

The buy-to-sell strategy is for more experienced investors who are adept at making deals and selling properties. The buy-to-sell or “house-flipping” strategy involves buying a property at a lower price than the estimated market value, renovating it, and then selling it at a higher markup.

Houses in Multiple Occupation

In the UK, an HMO or a House in Multiple Occupation refers to a property that is rented out to multiple tenants who share common facilities such as kitchens and bathrooms. It is an excellent setup for areas that see a high intake of university students or young professionals who have just entered the corporate world.

Real Estate Investment Trusts

Real Estate Investment Trusts (REITs) are preferred by those who want a hands-off approach when it comes to real estate investments. To understand how to invest in real estate through REITs, investors should know the companies who own the properties. The yield is the dividends that are paid to the investor by the company itself.

Property Crowdfunding Schemes

When it comes to newer methods of real estate investment in the UK, property crowdfunding schemes are currently gaining traction as they allow many investors to pool their capital to buy a property and share the returns on investment. It is the perfect option for investors who do not have much capital to spare, and is on the lower scale when it comes to risks and, unfortunately, the capital gains as well.

Making Money From Property Investments In The UK: The Top Five Time-Tested Strategies

To select the best investment strategy for maximum ROI, investors must first understand what their financial goals are for both long-term and short-term periods, how much capital they can invest, and how hands-on they want their approach to be.

Low-Risk Strategies (Lower Gains)

These two strategies are generally considered safe and easier to manage with only a moderate amount of capital needed.

Buy and Hold – Best For Long-Term Wealth Building

A beginner-friendly strategy that is ideal for investors who prefer the long-term approach, buy-and-hold is where investors will buy a house or property and keep it in their portfolio for an extended period, typically 2 to 5 years or more. Investors can either wait for it to appreciate in value or rent it out. Both approaches will generate increasing rates of yield over time and will contribute to significant capital growth. The only two downsides to this strategy are the necessity for a substantial amount of capital and the time required to let the asset appreciate in value.

REITs – Great As A Hands-Off Approach

This strategy is perfect for investors who are not interested in direct property ownership but still want to benefit from the rental yield and capital growth of the UK’s real estate market. For those who want to know how to invest in real estate without much capital, REITs offer such investors a clean, low-risk, and highly liquid entry point into property investments. Investors are buying and selling shares of companies that own the properties, allowing them to keep their hands clean from property management whilst still enjoying the various benefits.

Medium-Risk Strategies (Moderate Gains)

Although not risky, these strategies should be carried out as part of a calculated investment manoeuvre, and investors must do their due diligence regarding demand and location to ensure they get the maximum ROI on their investments.

House Hacking – Ideal for Limited Budget

This strategy is excellent for investors who are unsure about their foray into real estate investments and want to explore a low-cost option first. House hacking is a different method of HMO where the owner or investor lives in one unit of a multi-unit property whilst the other units are rented out. For those who can find locations close to universities, offices, and corporate hubs in the UK, house hacking will provide a substantial amount of rental return each month, allowing investors to enjoy a hands-on approach to real estate investments without incurring too many expenses.

Buy-To-Let Properties – Best for Passive Income

Rental properties or buy-to-lets are considered a moderate-risk investment as investors need to secure a good rental unit in a location with high rental demand. If either of these two criteria are not met, it is challenging to meet the expected rental yield each month. It is an excellent strategy for those who enjoy property and tenant management, and through rental properties, investors are not just gaining rental income over time but capital gains as well, as the house they own appreciates in value over time.

High-Risk Strategies (Highest Yields)

For those who are not averse to risks and want to build a large amount of capital in a shorter time frame, the buy-to-sell approach is unparalleled.

Buy-To-Sell

It is an exciting strategy that is perfect for investors who love to research and get involved in the field. In this strategy, undervalued properties are bought, renovated and improved, and later sold to the highest bidder. Although it carries a considerable amount of risk, it is lucrative as it delivers an enormous ROI. However, the research involved and market planning required are certainly demanding, and this strategy is only meant for those who are experienced in real estate.

If you still find it challenging to identify the right strategy that works for you, our team of experts at Global Phoenix can assist you in creating a personalised investment strategy—one that is aligned with your investment goals and preferences. Let us help you get started the right way.