7 Property Investment Strategies For Maximum ROI

As of June 2024, the mortgage rates in the UK are going up to 5.39%. With a wrong property investment strategy, instead of earning money, you can end up losing money when paying the mortgage. 

If you are searching for the right property investment strategy that can give you maximum ROI with minimal risk, then keep on reading. 

Here are high-return property investment strategies for 2024

In 2024, these are some high-return property investment strategies you should choose from. 

1. Rent to Serviced Accommodation (R2SA)

Rent to Serviced Accommodation (R2SA) is a property investment strategy where you lease a property from a landlord and then sublet it. You rent the property on short-term stays as serviced accommodation.  You can pick furnished apartments, studios, or even houses that cater to professionals, tourists, or contractors needing flexible living arrangements.

R2SA offers potentially higher returns compared to traditional buy-to-let properties in the UK due to several factors. 

1. Serviced accommodation typically commands a higher nightly rent than a standard long-term tenancy.
2. With short-term lets, you’re less likely to experience prolonged vacancies compared to traditional tenancies. 

Pros of R2SA:

• You earn more income compared to the traditional buy-to-let strategy.
• Shorter void periods due to tenant turnover. 
• Maintenance cost is low as it is often handled by service accommodation operators.
• You can manage the property yourself or hire a service for guest communication, cleaning, and maintenance. 

Cons of R2SA:

• Management can get hectic if you choose to do everything by yourself, starting from client communication to cleaning and maintenance.
• You need to comply with local regulations regarding short-term lets and licensing requirements.
• You Need to carefully select the  R2SA operator, as their management will directly impact your income and property condition.

How to get started with R2SA?

1. Start by understanding the R2SA market in your chosen location. Analyse competitor offerings, rental rates, and local regulations.
2. Look for properties suitable for short-term stays, considering factors like location, amenities, and proximity to demand areas.
3. Research reputable R2SA companies in your area. Evaluate their experience, track record, and the terms of their agreements.
4. Ensure compliance with landlord-tenant laws, short-term letting regulations, and tax implications for R2SA income.

👉 Pluxa property (UK’s biggest property investment company) helps you in rent to service accommodation services. 

2. Buy to Serviced Accommodation (B2SA)

The fundamentals of B2SA (buy-to-serviced accommodation) are similar to those of R2SA; the only difference is that in B2SA, you purchase the property instead of leasing it. 

The reasons for its high-return property investment strategy in the UK are similar to R2SA’s, which are higher nightly rates and fewer void periods.  But it might have an additional perk, which is giving you potential tax benefits. 

Pros of B2SA:

• You can earn potentially more income from your property investment compared to traditional buy-to-let.
• You experience fewer void periods due to tenant turnover.
• You get more control over the property. You can either manage it yourself or hire professionals to do it on your behalf.
• Owning the property allows you to benefit from any potential increase in its value over time.

Cons of B2SA:

• Purchasing the property requires a higher upfront investment compared to R2SA.
• Managing the property and client communication all by yourself can be significantly time-consuming.
• Rental income and occupancy rates can fluctuate depending on seasonality and tourism trends.

How to get started with B2SA?

1. Start by assessing your financial capacity for a property purchase and ongoing expenses like maintenance and potential vacant periods.
2. Then, analyse the B2SA market in your chosen location. Research competitor offerings, rental rates, local regulations, and potential property types.
3. Identify suitable properties for short-term stays, considering factors like location, amenities, and proximity to demand areas.
4. Secure a B2SA mortgage from a lender specialising in serviced accommodation investments.
5.  Decide whether to manage the property yourself or outsource guest communication, cleaning, and maintenance to professional services.

👉 Contact our investment experts to learn about Buy to serviced accommodation services for maximizing your return on property investment.

3. Buy-to-let (BTL)

Buy-to-let is one of the oldest and most traditional property investment strategies, where you purchase a residential property and rent it out for long-term occupancy (at least six months).

Buy-to-let remains a popular investment option in the UK due to factors like-

1. It provides a high-profit source of income and can be a great addition to your retirement plan. 
2. Over the long term, property values in the UK have historically shown growth, offering the potential for capital gain when you sell the property.

Pros of BTL:

• Compared to other property investment strategies, BTL is a lot more straightforward. 
• BTL can be a good long-term investment strategy, potentially providing a steady income stream for many years.
• Owning the property allows you to benefit from any increase in its value over time.
• Landlords in the UK may be eligible for certain tax reliefs on mortgage interest and property expenses.

Cons of BTL:

• Requires a significant initial investment to purchase the property.
• Being a landlord involves ongoing responsibilities like finding tenants, managing repairs, and dealing with potential legal issues.
• Periods without a tenant can result in lost income.

For a deeper understanding of financing your investment, check out our blog on Buy To Let Mortgages: What It Is and How Does It Work?

How to get started with BTL? 

1. Start by assessing your financial resources for property purchase and ongoing costs like mortgage repayments, maintenance, and potential vacant periods. 
2. Do market research on your chosen location. Focus on factors like rental yields, average rent of the area,  property types that are in demand and potential tenant demographics. 
3. Find a suitable property that matches your budget, investment goals, and target tenant profile. Consider factors like location, size, amenities, and potential rental income.
4. Secure a buy-to-let mortgage from a lender specialising in investment property financing.
5. Decide whether to manage the property yourself or hire a letting agent to handle tenant communication, rent collection, and property maintenance.

4. Fix and Flip

In the fix and flip strategy, you purchase a property below market value (typically one that needs repair and renovation), improve its condition, and quickly sell it for a profit. 

Fix and Flip offers the potential for high returns in a relatively short time frame compared to buy-to-let properties. It is because you focus on buying undervalued properties that you then add value through renovations. This naturally leads to a higher selling price. 

Also, in this strategy, you sell the property within a short period of time. Hence, you eliminate the ongoing maintenance costs that come with holding a property for a long time. 

To make money through this strategy, always follow the 70% rule.
As per this rule, you should not invest more than 70% of the after-repair value (ARV) of the property. 

The formula you can follow is:

 Maximum purchase amount = (ARV x 0.7) – total repair cost

For example, if a property’s ARV is £300,000, 70% of it would be £210,000. This is the maximum amount you should invest in buying the property. The remaining £45,000 will be set aside for repairs. 

This calculation will ensure that you never lose money on the property. The more you can negotiate on buying the property and renovation costs, the more profit you’ll be able to make. 

Pros of Fix & Flip:

• Fix and flip can generate significant profits if renovations are completed strategically and the property market remains favourable.
• You can see a return on your investment quicker compared to buy-to-let strategies.
• You get control over the renovation process and the final product you bring to market. 

Cons of Fix & Flip: 

• Renovation costs can be unpredictable, and unforeseen issues can significantly impact profit margins.
• Profits rely on selling the property quickly at a desired price, which can be affected by market fluctuations.
• You need to have an eye for identifying properties with the right renovation potential and completing them efficiently. 

How to get started with Fix & Flip?

1. You need to start by gaining knowledge about construction costs, local building regulations, and the renovation process. Consider attending workshops or hiring a contractor for guidance.
2. Search for undervalued properties in your targeted area. Look for properties that can have high buyer demand after renovation.
3. Secure financing for the property purchase and renovation costs. Hard money loans or private lenders may be suitable options for fix and flip projects.
4. Develop a detailed renovation plan outlining the scope of work, budget, and timeline.
5. Prepare the property for sale by keeping the buyer demographic in mind. 

5. Commercial Property

In this property investment strategy, you purchase or acquire ownership rights of an income-generating property used for business purposes. Commercial properties include office buildings, retail spaces, warehouses, industrial facilities, hotels, and healthcare facilities.

The biggest perk of investing in commercial properties is that their returns are significantly higher than residential properties. You can easily put out your commercial property on a high rental rate for a longer duration ( typically three to ten years). 

While you get the rent, your property will also keep appreciating in value, depending on your location. 

Pros of commercial property:

• With long-term leases with established businesses, you can expect a stable income source.
• You also benefit from the property value increase over time.
• Based on the size of the property, you can have multiple tenants, which eliminates the risk of vacancy.  

Cons of commercial property:

• Commercial properties are typically costlier compared to residential properties. So, your upfront investment will be higher.
• Managing a commercial property involves dealing with complex lease structures and high maintenance costs. 
• It is usually difficult to sell a commercial property. So, it is not an investment option with great liquidity. 

How to get started with commercial properties?

1. Start by understanding your risk tolerance and how much you can invest.
2. Then, based on your investment capacity and income expectations, look for commercial properties in your chosen location. 
3. When choosing a location, consider factors like rental yields, vacancy rates, property types in demand and other industry trends. 
4. Explore financing options for commercial property purchases. Commercial mortgages typically have stricter criteria and higher interest rates compared to residential mortgages.
5. Decide on a management strategy. You can either manage the property yourself or hire a professional property management company.

6. Real Estate Investment Trusts (REITs)

In this strategy, you invest in REIT companies (Real estate Investment Trusts) that own, operate or finance income-generating real estate. 

This is great if you want a diversified real estate portfolio without directly buying, managing or financing properties. REITs trade on major stock exchanges, such as shares of a company.

It is a good option for UK investors as it is an easy way to invest in real estate with a lower minimum investment compared to buying a physical property. Plus, you get to invest in a variety of property types like office buildings, shopping malls, warehouses, etc, which reduces the risk. 

Besides, most REITs distribute a portion of their rental income to shareholders as dividends, providing a regular income stream.

Pros of REITs:

• It is easy to start with lower capital investment. 
• You get an exposure to a variety of properties.
• REITs trade on stock exchanges, offering greater liquidity compared to directly owning real estate.
• REITs are managed by experienced professionals, so you don’t have to worry about getting involved. 
• You get regular dividends, creating a steady source of income. 

Cons of REITs:

• Market fluctuation can impact your investment value. 
• You don’t have any direct control over the properties you invest in.
• Your income relies on the REIT’s ability to generate rental income.

How to get started with REITs?

1. Research and analyse different REITs listed on UK stock exchanges. Consider factors like their investment focus, dividend history, and fees.
2. Understand your risk tolerance, as REITs can be volatile. Only go for REITs that match your investment goal and risk tolerance. 
3. Open an investment account with a reputable broker to buy and sell REIT shares.

As a side note, always consider including REITs alongside other investments to dilute the risk. 

7. Student Accommodation

For this investment strategy, you can purchase or acquire purpose-built student accommodation (PBSA) blocks, converted houses of multiple occupancy (HMOs), or other properties that can be turned into student accommodations. 

It is a high-return property investment plan as the student housing costs across different UK cities are increasing. This is happening due to the constantly increasing number of students moving to the UK to pursue higher studies.

According to UK student accommodation statistics, by 2026, 2.2 million students will need accommodation, which is a 39% increase since 2021. 

However, there will be a shortage of around 621 thousand beds due to the lack of enough PBSAs and HMOs. So this can be a great opportunity for you to take advantage of. 

Image: location-wise distribution of demand for student accommodations

Pros of student accommodations:

• Student tenancies are very predictable as they align with academic terms. So you will have a reliable income stream. 
• Due to high student demand, periods without tenants will be less.
• Student rents can be higher compared to traditional buy-to-let properties in certain locations.
• It is a niche investment opportunity as you will be catering to a specific demographic with unique needs. This can help you break into the market easily.

Cons of student accommodations:

• The demand and rental yield of your property will heavily rely on the proximity and quality of the nearby educational institute.  For example, if your property is near an Ivy League university, the demand and rental yield will be higher. 
• Student properties need specialised management.
• University enrollment can impact occupancy rates. 
• There are specific regulations and licensing requirements for student housing properties. 

How to get started with student accommodations?

1. Choose a location and start researching the student numbers at nearby universities, existing student accommodation options, rental rates, and potential property types.
2. Decide whether you want to invest in a purpose-built student accommodation (PBSA) scheme or a converted HMO property.
3. Find a property with the right location, size, amenities, safety features, and access to public transport.
4.  Secure financing for the property purchase. Explore buy-to-let mortgages or specialised student accommodation financing options.
5. Develop a plan for managing the property. Consider managing it yourself or hiring a student accommodation management company.

👉Learn more about the advantages and considerations of this approach in our HMO Investment (UK) guide

How does property investment work?  

In property investment, you buy or acquire a property (residential or commercial) to generate a steady income or profit out of it. 

There are different strategies that you can use to achieve that like renting it out or flipping it for renovation gains. You can also invest in properties without buying them physically through REITs. 

The flow chart below shows how most property investment processes work. 

Is property still a good investment in 2024? 

Property can still be a good investment in 2024, but it depends on your financial goals, the amount you can invest and your risk tolerance. 

Over the last two decades, mortgage rates in the UK were at their lowest around 2022, and currently, they are on the higher side. So, if you have the finances to invest in a property with these mortgage rates, then it can be a good idea.

Here are some other pros and cons you can consider before making the decision. 

Pros: 

• Historically, most properties have the potential for significant returns due to rental income or value appreciation. 
• Properties are tangible assets, so they are great if you are looking for a concrete investment. 
• You get a diverse investment portfolio, potentially mitigating risk compared to relying solely on stocks or bonds.

Cons:

•  Purchasing property requires a significant initial investment, including a deposit, potential renovation costs, and buying fees.
• Property prices and rental yields can fluctuate depending on economic conditions and local market trends. (Calculate your rental yield now)
• Being a landlord involves ongoing responsibilities like finding tenants, managing repairs, and dealing with potential legal issues.

How to buy an investment property? 

1. To invest in a property, you need to start by defining your goals. Once you have that, you can decide on what kind of property (commercial or residential) you want to invest in and what strategy to follow (all the seven that we discussed here). 
2. Then, secure mortgage pre-approval to understand your borrowing power.
3. Based on the above two criteria, you can then start looking for the right property. You can do the search on your own or with the assistance of professionals. 
4. After finding the right property, make an offer, negotiate and secure the property with legal guidance.
5. You can then move on to finalising your mortgage and secure property insurance. 

Based on your financial goals, you can then let it out or go with a fix and flip strategy. 

If you are a first-time property investor and the process seems too complicated, you can always hire a property professional to guide you. 

What is a good ROI for property investment in the UK? 

In general a good ROI for property investments in the UK is considered around 5-7%. This is considering that the rental yield in the UK is around 5-8%. 

However, your ROI can’t solely be calculated based on rental yield because you have to consider ongoing expenses like maintenance, insurance and taxes. 

How can I increase the value of my investment property? 

Renovations are the typical way of increasing the value of a property, so here are some things you can consider doing. 

• Focus on improvements that enhance functionality, aesthetics, and curb appeal. For example, modernising kitchens and bathrooms, improving energy efficiency or adding features desired by renters.
• Regularly maintain your property. Do upkeep to protect your investments and costly repairs. 

Besides that, you can also ensure that you are providing competitive rent so that you can have a minimal vacancy period. 

What type of property is most profitable? 

No fixed type of property can be considered most profitable, as each has its own pros and cons.

For example, buy-to-let residential properties are good for a steady income and potential capital gain, but there are a lot of management responsibilities and risk of void periods. 

In the case of fix and flip projects, you get high profits quickly, but you need to have renovation expertise, which requires high upfront costs. 

Similarly, for commercial properties, the rental yields are high, plus you can have long lease terms, but the upfront investment is huge plus the liquidity is low. 

Therefore, to find the most profitable property, you need to weigh all the pros and cons and see what suits you best.