The UK’s investment property market has never led down the investors in the long run. Whether it is through property value appreciation or rental yield.
If you are planning to invest in property in the UK market, residential property investment might be just what you are looking for. It is more traditional and comparatively less complicated than other property investment strategies.
Today, we will cover everything you need to know about residential property investment to start building a successful portfolio in the UK market. We will also be sharing tips on how to make the journey easier for you, so let’s get started.
What is residential property investment?
Residential property investment is when you buy a property, typically a house or apartment, to generate income or profit from its value increasing over time.
For example, buy-to-let is one of the most common approaches to residential property investment. In this approach, you purchase a property with the goal of renting it out to tenants. You earn rental income each month, and ideally, the property value will also increase over the long term, allowing you to sell it for a profit later.
Types of residential property investments— which one is best for maximum profit?
Here are some popular residential property investment types that range from low investment to high return types:
1. Rent to Serviced Accommodation (R2SA):
- Concept: You lease a property from a traditional landlord and then sublet it as serviced accommodation, typically on short-term lets through platforms like Airbnb.
- Pros: Potentially higher rental yields compared to traditional buy-to-let and more flexibility in pricing based on seasonality.
Plus, the investment amount is nominal. The majority of Pluxa’s clients have made over £100k in three years with an investment of only £30k.
- Cons: It requires active management for cleaning, guest turnover, and amenities, and legal regulations around short-term lets may vary by location.
2. Business to Serviced Accommodation (B2SA)
- Concept: Similar to R2SA, but instead of leasing from a single landlord, you might partner with a property management company that holds a portfolio of serviced accommodation units.
You manage the bookings, guest services, and cleaning for a portion of the rental income.
- Pros: Potentially less responsibility for finding properties, leverages existing infrastructure and network of a property management company.
Some companies like Pluxa also give you a guaranteed rental income on property, no matter what the situation is.
- Cons: You might have a lower profit margin compared to running your own R2SA operation. Plus, you get less control over the property and guest experience.
3. BRRR (Buy, Refurbish, Rent, Refinance)
- Concept: You purchase a property at a lower price that needs renovation and refurbishment to increase value. You do what is needed and rent it out to generate income. Once the market value of the property gets higher, refinance the property to recoup your initial investment and potentially access additional capital.
⭐ If you want a detailed guide on the BRRR strategy, we have already created one. So do have a look at it.
- Pros: Potential for higher returns through value creation and rental income, utilises debt financing to maximise investment.
- Cons: Requires renovation expertise or project management skills; construction delays or cost overruns can impact profitability.
However, this issue can easily be resolved with Pluxa Property. After acquiring the property, you can contact Pluxa to get assistance with tasks like renovation, tenant sourcing, and tenant management.
If you’re interested in strategies like property flipping that can complement your BRRR investments, check out our detailed guide on What is Property Flipping? to learn more about maximizing your investment returns.
4. New Build Apartment
- Concept: Investing in newly built apartments involves purchasing a recently constructed or under-construction apartment specifically for rental income or potential future resale. These properties are attractive for their modern features and amenities and potentially lower initial maintenance needs.
- Pros: New builds are often made following modern design layouts. This is why most people prefer moving into them. Plus, you can even charge higher if your new build has good amenities like energy-efficient appliances and trendy features like in-unit laundry or smart home technology.
- Cons: New builds often come with a higher initial purchase price than similar-sized older apartments. You’ll be paying for the novelty and modern features. Plus, new builds can sometimes have minor construction issues that may need addressing during the initial warranty period.
👉 Find real estate and property investment trends
How to start with residential property investment in 2024?
If you are all set to invest in residential properties in 2024, here’s a step-by-step guide on how to do that.
1/ Decide Your Strategy & Expected Outcomes
The first thing you need to decide is what outcomes you want out of this property investment. Do you want it to generate steady rental income, or what long-term capital appreciation or both?
Once you have decided on that, you can choose a suitable investment strategy from the above.
While you pick a strategy, define factors like-
- Your risk tolerance ( the amount of money you can risk for the investment),
- How much capital you have for investment (deposit amount/ purchase price)
- How much do you have for ongoing expenses (renovation, maintenance, etc).
Outlining these will help you set clear expectations of what kind of strategy and property is best for you.
2/ Choose Your Investment Property
For good residential properties, look into areas with high rental demand, good transport links, and potential for future growth. Tools like Rightmove and Zoopla can help with your search.
When looking for properties, consider factors like single-family homes, multi-unit properties, apartments, or student accommodation. Each has its own pros and cons regarding rental income, management effort, and potential returns.
If you are getting flustered with all this information and shortlisting, Pluxa can assist you in conducting market research, identifying high-demand areas, and connecting you with reliable property solicitors to ensure a smooth buying process.We can help you find properties based on your income goals.
Alternatively, you can learn how to become a property deal sourcer to find great investment opportunities yourself
3/ Secure Finance
It is always better to finance your investment and not put all your savings into acquiring a property. You can explore buy-to-let mortgages specifically designed for investment properties. Lenders typically require a higher deposit (around 25%) compared to standard mortgages.
⭐ Complete guide on investment property loans for property investors
4/ Consider Additional Costs and Ongoing Management
Acquiring any property involves a number of additional costs, such as stamp duty, legal fees, property insurance, potential renovations, maintenance costs, and letting agent fees (if applicable).
Consider them while doing your calculations to have a safe and sound plan.
Apart from that, you also need to decide whether you will manage the property yourself or hire a letting agent. To make the right choice, consider the time commitment and your comfort level with tenant issues.
Pluxa offers property management services, taking care of tenant onboarding, rent collection, maintenance issues, and property inspections, freeing up your time to focus on your investment portfolio.
5/ Acquire The Property & Prepare It For Renting
Negotiate the proprietary price and finalise the purchase. For the legal aspects of the purchase, you would need to appoint a solicitor.
While preparing the property for renting, make sure you are meeting the safety regulations. You can also make renovations or upgrades to enhance the curb appeal of the property to appeal to potential tenants.
6/ Find & Manage The Rental Process
To find tenants, you can list your property on portals like Rightmove or Zoopla or join relevant social media groups and post advertisements about your property.
Once you have people enquiring, screen potential tenants thoroughly to ensure that they are reliable and responsible.
Or, instead of going through all this, you can take Pluxa’s help.
Pluxa can advertise your property, conduct tenant referencing, and handle tenancy agreements, ensuring a smooth onboarding process.
Should you invest in UK residential property? —The answer is ‘Yes’
Yes, in 2024, investing in UK residential properties is still a great idea.
According to Zoopla, UK house prices are expected to grow by 1.5% by the end of 2024. So, if you are investing now, you can almost expect to see an instant profit through property appreciation. However, the change may vary based on region. For example, the growth rate across southern England may not show any changes, while everywhere else, you see the price hike.
So you must select the right area to invest in properties. We have done a detailed discussion on the most profitable areas in the UK in 2024 for investment properties. You can check that out for more insights.
Rent-to-service accommodation (R2SA) residential property investment opportunities in the UK
Discover the essential steps to start your rent-to-rent business in the UK, including practical tips and strategies to ensure a smooth launch.
How Pluxa Property helps you get maximum return from buy-to-let properties in the UK
Pluxa Property can assist in residential property investment in the UK through several strategies and services, such as:
1. Rent to serviced Accommodation (Rent2SA)
Achieve impressive returns with minimal investment – £100k+ over 3 years from just £30k. Our property investment experts can help you build a successful R2SA portfolio with no prior experience or time commitment required.
2. Buy to Serviced Accommodation (Buy2SA)
Pluxa Property can help you earn up to 15% rental yields by investing in serviced accommodation properties in Birmingham. Our Buy2SA strategy offers the potential for over 20% ROI and 5% annual capital appreciation, with high monthly cash flows exceeding £1,000.
3. BRRRR investment in the UK
Pluxa helps identify undervalued properties suitable for BRRRR, oversee renovations to increase value, secure financing and refinancing to recycle capital, and manage tenants.
Our expertise in each step streamlines the process and minimises risks, allowing investors to scale their rental portfolios in the UK efficiently.
👉Explore our selection of top property investment books for 2024, designed to provide you with expert insights and strategies for maximizing your returns
FAQs
Q: What is a residential REIT?
A residential REIT is a company that owns and operates income-generating residential properties. You can invest in REITs if you are not sure about investing in physical properties. You invest in the REIT by purchasing shares that trade on a stock exchange. Plus, investing in residential REITs can help you diversify your portfolio by allowing you to invest in multiple properties without spending a huge amount of money.
Q: What is the difference between residential and investment mortgages?
The fundamental difference between residential and investment mortgages is that you take a residential mortgage to acquire a property where you will be living yourself. On the other hand, you take an investment mortgage to acquire properties like rental houses or commercial properties, which will help you make money.
Along with that, the mortgage rates also vary. Residential mortgage rates are typically lower than investment mortgages.
Q: What is the difference between residential and non-residential investment?
Residential investment properties are those that are used for living, like apartments, houses, student accommodations etc. On the other hand, non-residential investment properties are used for commercial purposes. Like, office buildings, retail stores, warehouses, industrial facilities etc.
While non-residential properties offer higher rental yields, they also require higher initial investment and are more complex to manage.
Q: What factors should I consider when selecting a property location?
Some of the major factors you should be considering while selecting a property location include- the rental demand of the area, how good the transport links are, proximity to amenities like schools, shops, parks or entertainment options, and the overall property value history of that area.
Q: What are the different residential investment strategies offered by Pluxa Property?
The residential investment strategies offered by Pluxa Property include- Rent To Serviced Accommodation (R2SA), Buy To Serviced Accommodation (B2SA), Overseas Investments and BRRR (Buy, Refurbish, Rent, Refinance) investments.
Peter Juhasz is the founder of Pluxa Property, the biggest property investment company in UK and Group CEO of AIP Capital Group and a property investment expert with over a decade of experience in the UK market.
He built a successful property company using innovative cashflow strategies like Serviced Accommodation and HMOs, scaling to 200 units in four years.
Peter leads a team specializing in property and business acquisitions across various sectors. A former co-host of “Cashflow With Property,” he shares his expertise in real estate investing and business scaling.
He is committed to continuous learning and helping SME owners and investors maximize their returns, driven by his passion for empowering others to achieve their financial goals.
To learn how Pluxa Property can help you in UK property investment, contact our experts.
