How To Invest In Property UK (2024 Guide)

Investing in UK properties may sound interesting, but if you aren’t aware of how to do that, meeting your goals can be challenging.

Over the past 12 years, we have acquired extensive knowledge of the UK property market and assisted numerous investors in fulfilling their goals. 

This guide provides you with 11 key steps for investing in property in the UK, identifying property hotspots, and identifying the types of investment models that can maximize returns.  

What is Property Investment?

Property investment is the purchase of residential or commercial property in the UK to earn from it. You can either rent it out for consistent rental income or take advantage of capital appreciation by holding it for longer periods and selling it at higher prices, or both. 

Three common strategies for property investment in the UK are buy-to-serviced accommodation, rent-to-serviced accommodation, and the BRRRR strategy. You can also invest in properties abroad and make higher returns. 

Why invest in property in the UK?

There are multiple reasons to invest in property in the UK. Some of them are listed below. 

1. Higher rental income: With the rising need for rental properties in the UK, the average rent has also increased, leading to better rental yield. It can be a lucrative opportunity for property investors looking to generate passive income from rental properties. 
2. Growth in housing prices: As property prices rise in the UK, you can sell your previously bought properties and make higher profits from capital appreciation. 
3. Increased job opportunities: Young professionals are flying to the UK for better job opportunities in almost every sector, increasing the demand for rental properties 
4. Regeneration projects: The UK has numerous regeneration projects that aim to increase job opportunities and improve transportation links.
5. Favorable legal framework: The legal system of the country is flexible for property investors, making the UK the best place for buying, renting, and selling properties. 

What Are the 11 Key Steps to Successful Property Investment in the UK?

Step 1: Understand property investment goals

You must set your goals before investing in properties. For example, your short-term investment goals can include buying a property and selling it quickly, whereas your long-term goals can include buying a property, renting it out for extended periods, and then selling it when property prices rise. 

Some investors don’t want to deal with the hassle of buying and selling properties. They can opt for property crowdfunding, in which a group of investors pool their funds to buy a property, and each investor owns a share of the asset.

Some of the famous property investment goals include:

1. Sell property at higher prices due to capital appreciation 
2. Generate a steady stream of income from rental payments 
3. Diversify investment portfolios to mitigate risk 
4. Secure financial stability and income in retirement 
5. Achieve short-term profits through buying, renovating, and selling properties
6. Contribute positively to society through affordable housing, sustainable developments, or regeneration projects while achieving financial returns.

When your investment goals are clear, you can tailor strategies to achieve desired outcomes.

Step 2: Research ways to invest in property 

There are multiple ways to invest in a property, directly and indirectly. 

Firstly, identify whether you want to invest in a residential or commercial property. Commercial properties are used as office spaces, retail units, and industrial properties, whereas residential properties are used for accommodating people.

The main types of property investment that you can consider are 

1. Buy to Let: Invest in residential properties that are rented out for extended periods. 
2. Buy to Sell: Buy a property, do some renovations, and sell it at higher prices. 
3. Buying new-build properties to sell on: This refers to investing in a property before the developer entirely constructs it. You can get a lower price at the outset than the property’s market value once completed. The property can then be sold to make higher profits. You can also add value to it by decorating it according to your taste. 
4. Investing in overseas property: If you aren’t satisfied with UK properties, you can buy properties abroad. We have helped multiple investors find top properties in Spain at lower prices and better return opportunities. When not being rented out, you can use this property as a holiday let and also for personal fun during off-seasons. 
5. Putting money in Real Estate Investment trusts (REITs): REITs pool funds and invest in multiple properties. They earn money from the properties’ rental incomes. You can buy their shares on the stock market, and your money will be added to other investors’ funds and invested in a property. They pay out 90% of the income to all the shareholders without the stress of paying CGT or corporation tax. 

Step 3: Understand property market trends 

Knowing property market trends can help you make informed investment decisions. For example, if you research market data, you will understand the current property price of a particular area, its rental yields, and vacancy rate. It will help you invest in a high-demand location with higher long-term growth potential. 

Following economic indicators is also essential for property investors. It includes monitoring the market’s impact on interest rates, employment rates, and inflation. For example, if you invest in a region with solid job growth and low interest rates, you can take advantage of increased rental demand and higher returns.

Additionally, local factors like the presence of reputed schools in the area, the transportation network, and local amenities influence rental demands. 

Step 4: Know the risks associated with property investment 

Understanding the different risks associated with property investment helps you stay prepared from the beginning. Over time, it reduces potential losses and maximizes your investment returns. 

Here are the key risks that you must consider 

1. Market risk: The property market is constantly changing as property prices fluctuate and rental demand fluctuates.
2. Interest rate risk: Changes in the interest rate will impact your mortgage costs and minimize return on investment.
3. Management risk: Poor management can lead to more wear and tear on the property, impacting rental income. It also increases maintenance and repair costs, reducing overall investment returns. 
4. Legislative risk: Property laws, tax regulations, landlord-tenant laws, rental policies, and other regulations keep changing in the UK, affecting your investment. For example, the additional 3% SDLT surcharge on second homes and investment properties has purchased additional properties expensive, reducing investors’ profitability. 
5. Tenant risk: Tenants can often damage the property and increase your repair and maintenance costs. They may also default on rent and break your income flow. If you don’t have a constant flow of tenants, it will cause extended void periods, resulting in a loss of rental income. However, you still need to pay ongoing expenses like utility bills, mortgage payments, insurance, and taxes.

The Leasehold Advisory Service body provides free legal advice on the laws affecting residential leaseholds throughout England and Wales. 

Step 5: Find a balance between income and expenses 

This one is important. If you don’t know how much to invest in a property business and what return to expect, you can run into a loss. 

Let’s break down the expenses of property investment 

• A minimum deposit: You must have at least 20-25% money of your overall property purchase price as a deposit for raising funds
• SDLT: Pay an additional 3% stamp duty land tax on your second home or investment properties over the standard rate. 

There are multiple other expenses related to property investment, like

• Insurance premiums 
• Maintenance cost
• Building surveyors fees
• Legal fees
• Safety Certifications 
• Mortgage payments 

Now, let us consider how you can generate income from the property. There are mainly two ways for it.

• Renting out the property for short-term or long-term and generating regular income
• Selling the property at a higher price than its buying cost and making a one-time lump sum profit

Step 6: Recognise funding options 

If you have sufficient cash in the bank, you can invest some of it in property. However, we recommend keeping your savings aside and instead taking out a loan or mortgage with a small deposit. Then, rent out your property and pay the mortgage. 

For short-term refurbishment in properties, you can take out a bridge loan with a short repayment period. Some of the famous property finance options are commercial mortgage, auction finance, and development finance.

Learn more about how to raise capital for property investment 

Step 7: Plan an exit strategy 

Before starting to invest in properties, you must have an exit plan in mind. 

Think about how long you will be investing in the property, how to leave your investment, and who your ideal buyer is. 

For example, you wish to invest for a longer period so that you can have constant income through rental returns for multiple years. Additionally, keeping your property on hold can increase its value due to capital appreciation over time. 

Planning an exit strategy requires determining your investment goals, assessing property market trends and economic indicators, planning for capital gain tax, and establishing a target ROI. 

You can also create multiple exit scenarios based on different market conditions. For example, if the market is down, consider renting the property instead of selling it immediately. Otherwise, if the property prices are high, sell it to make additional profits. 

Here are a few examples of exit strategies 

1. Sell the property when market conditions are favorable to increase profit
2. Refinance the property to extract equity while continuing to rent it out. It provides both liquidity and ongoing rental income. 
3. Convert the property’s use, like residential to commercial or vice versa, to target different market segments if the current one is underperforming.
4. Put property on auctions to provide a faster selling opportunity (in case it is hard to sell), often within 28 days, but the prices might be lower than the market value.

Step 8: Choose the suitable properties

You need to find the best properties to increase your rental income. Even if you are planning to buy and sell a property, you need to check out its location. 

Any property with a good transportation network and easy availability of amenities will have more rental demand. 

👉 Find the property hotspots in the UK with Pluxa Property

Step 9: Make an offer and complete the purchase 

Once you choose a property, you need to negotiate the price. Pluxa Property can help you source the best properties and negotiate prices and terms on your behalf. If you are satisfied with everything, ask your solicitor to prepare a contract and complete the purchase. 

For rent to serviced accommodation, you must check the tenancy agreement. According to the Tenant Fees Act, if you aren’t satisfied with the terms and conditions, you can walk out of the agreement without losing your holding deposit. 

Step 10: Get license and insurance in place

You need specific licenses and insurance to sell or rent your property in the UK.

For example, if you convert a property into an HMO, you require a specific HMO license from your local authorities. 

All landlords who rent their property need to join the Property Redress Scheme, which protects tenants’ rights. 

Also, make sure you register with the ICO (Information Commissioner Office). It ensures that your personal, property, and tenant data are all protected. 

Willing to sell your property to earn profits? 

Learn the basic requirements for selling a property in the UK.

Landlords need to arrange the proper insurance before renting out their property. For example, landlord insurance can cover your building and its contents, as well as the loss of rent. 

Another popular insurance for landowners is property owners’ liability. It protects landowners from all claims made by tenants for damage or physical injury to the property or its contents. 

Step 11: Make your investment profitable 

You can add facilities or renovate the property to increase its value. For example, you can replace old kitchen appliances with energy-efficient ones, renovate bathrooms with modern fixtures and fittings, convert unused space into a useful room like a guest bedroom or office, etc. All these modifications help you increase your rent and can increase your profits while selling. 

According to the Housing Act 2004, before letting out your property, you must undergo a thorough risk assessment. It ensures that your property meets all safety and health standards.

Types of properties to invest in the UK (property investment models)

• BUY2SA 

Buy-to-serviced accommodation is one of the top property investment strategies. You buy a completed property and rent it out. Plus, you can add or renovate the property to increase rent. 

Sometimes, these accommodations are used as short-term rentals, similar to holiday lets. It can provide rental stays for students, young professionals, tourists, and anyone with temporary accommodation requirements. 

The best part is that these short-term rentals provide higher returns than traditional long-term rentals. 

• RENT2SA 

If you look through our investment portfolio, you will find numerous rent-to-serviced accommodations in the UK. We have helped investors find these properties and negotiated with the landowners for prices and terms. 

You can rent these properties for a fixed period and further use them as short-term rentals. However, it is important to obtain permission from the landowner to use their property for rental purposes and pay them a fixed rent during the lease period. 

• BRRRR 

When some investors have a low budget to start with property investments, we recommend the BRRRR (Buy-Refurbish-Rent-Refinance-Repeat) investment strategy. Why? Because these properties are usually inhabitable and can be bought at lower market prices. We suggest you take bridging loans or a mortgage to refurbish them and increase property value. 

Then, rent it out to generate a steady income and use the rental income to refinance your property. Over time, the property price keeps rising, and when market conditions are reasonable, you can sell the property at a higher rate. 

• Commercial housing

Commercial housing is property used for business purposes. These are mainly shopping malls, supermarkets, office buildings, retail space, and small business shops that intend to make a profit. 

• Social housing 

Different government schemes can assist developers in developing properties to meet the UK’s affordable housing demand. The ROI depends on government subsidies, tax incentives, and long-term rental agreements. 

• HMOs

HMOs generate higher returns than single-let properties. These are properties shared by multiple tenants who are paying rent for individual rooms at the same time. Vacancy or default by one tenant has less impact on your overall income. However, you need to get specific licenses to run an HMO in the UK. 

• Buy-to-Sell

A buy-to-sell property strategy involves buying a property, holding it for a longer time, and then selling it when market conditions are good. 

• Property flipping 

It has a similar intent as a buy-to-sell property strategy but is a short-term strategy. You buy a property, renovate or refurbish it quickly to increase property and sell it at a higher price within a short period. Property flipping can yield higher returns but equally carries significant risks due to market fluctuations and renovation costs.

• Commercial Buy-to-let 

These are similar to residential buy-to-let properties. You can buy a commercial property and rent it out to other businesses for a particular period. The lease period for commercial buy-to-let properties is comparatively more extended than for residential properties. It means you will have long-term tenants who will ensure consistent cash flow for years. 

• Hotel lets

You can purchase a room within a hotel and use it for guest stays to generate income. Instead of having long-term tenants like buy-to-let properties, you can target tourists and business travelers for temporary stays. You can make large returns if the hotel is reputed and has huge demand in the area. Also, this strategy keeps you free from sourcing and managing tenants. 

• Property crowdfunding 

It allows you to indirectly own a property. A group of investors pool their funds to buy a property, and each holds a share of it. The crowdfunding platform manages the property on your behalf and sources tenants. You can earn a part of their rental income based on your investment amount or shares in the asset. 

What are the best places to invest in the UK property market?

There are numerous places in the UK suitable for property investments. We have listed a few of them

1. Birmingham 

Pros: 

• Located in the heart of England, with a great transportation network 
• HS2 regeneration project in the city is increasing rental demand 
• Perfect place for property investors targeting young professionals because of its growing job opportunities 

Cons:

• Some place still requires modern developments, which might affect the rental demands of that area
• Places with high rental demands are also places with high property prices, which makes buying properties difficult

2. Liverpool

Pros:

• Its affordable property prices make investors smoothly buy new properties and use them for rental purposes 
• The city is undergoing significant regeneration projects in areas like the city center and waterfront, boosting property values and rental demands

Cons:

• The economic recovery in the city can be slower than in major cities, affecting the long-term property value growth 
• Some areas have higher vacancy rates, especially those with less developed neighbourhood 

3. Manchester

Pros:

• Huge job opportunities in tech, finance, media, and other sectors drive strong rental demand 
• The rental yield in the city is increasing, making it a lucrative market for investors
• Excellent transportation network in the city increases the housing demands

Cons:

• High housing demand increases property prices, making it difficult for property investors to buy properties 
• The competition in the market is high, which makes finding good deals difficult 

4. Leeds

Pros:

• The city offers good business and investment opportunities, attracting young professionals and increasing accommodation needs
• The gross rental yield in Leeds is growing, and the monthly rent was £1,105 in August 2024

Cons:

• The city has seen an oversupply of properties in recent years, and increased competition among landowners can potentially reduce the rental yield 
• Underdeveloped areas can have increased crime rates, leading to less rental demands 

Some of the other top cities for property investments in the UK are:

• Nottingham 
• Bradford 
• Brighton 
• Cheltenham 
• Harrow
• Halifax
• London
• Cardiff
• Doncaster 
• Oldham
• Peterborough 
• Blackburn

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

5%- 8% is a good return on investment for property in the UK. The gross rental yield of around 6% is considered a good return. However, sometimes, if your expenses are higher, like property maintenance costs, insurance, and taxes, you will make lower ROI, even if the gross rental yield is high. 

To calculate the rental yield percentage of your property, you need to divide your annual rental income by the property value and multiply the total by 100. Don’t forget to subtract all the expenses from your gross annual rental income before calculating rental yield. 

Is 2024 a good time to invest in UK property?

Yes, 2024 is a good time to invest in UK property. According to Zoopla, house prices over the first 7 months of 2024 have increased by 1.4% in the UK and are expected to rise up to 2.5% by the year ending. 

This leads to increased rental demand in most parts of the country. Also, you can sell any property at better prices during this year. 

How Pluxa Can Help You Succeed in Property Investment in the UK

Experience in property investment 

With 12+ years of experience in the proper investment market, Pluxa Property is one of the leading property investment companies in the UK. You can set up an online one-on-one meeting with one of our experts to discuss your goals. 

👉 Contact our investment experts

Customized investment plans 

They can assist you in developing the best strategy that is within your budget and can achieve the best outcomes within set times. This is a 100% free service, but at times, you may need to pay a 5% deposit for off-plan or completed properties. 

Find properties in prime locations. 

We not only help you find properties in prime locations but also negotiate for good property deals, allowing you to generate higher ROI with limited investments. Plus, we refurbish properties to increase their value and rents.

The best part of Pluxa Property is our expertise in property management. We not only set up modern properties and provide top-notch amenities but also offer personalized guest services to increase demand and improve ROI.

In-house sales team

Listing your properties only on platforms like Airbnb and booking.com may not generate the expected bookings and profit. Therefore, we have established our own in-house sales team that can help you generate consistently high levels of corporate bookings for all our managed properties. 

The team regularly achieves bookings for 30 to 60 days and sometimes for 6 months to a year, helping you generate higher booking revenue.