Although, investing in the property market generates high revenue, it requires right strategies to book profits. As there are a number of strategies available to create wealth out of property investment UK, it is necessary to choose the right finance and purchasing strategies. This is even more important for the first time property investor with relatively less experience.
Factors influencing property investment UK
In case of property investment UK strategies, there is no generic solution as each investor has different circumstances. The best property investment UK strategy will depend on a number of factors such as personal finance situation, your attitude to risk, your goals and ambitions, investment time frame, skills and experience, credit rating and whether you want short or long terms gains.
Low mortgage rates
Property investment UK is now within the reach of a larger number of potential investors as mortgages are far more affordable now compared with the earlier times. Lenders have eased on their lending terms amid rising competition and targeting a larger customer base. That is why property investment UK is a big business now which is expected to continue to rise. Therefore, investors need to think about different strategies for ensuring the success of their property investment UK.
Some of these strategies are:
Diversification is the key to success for property investment. Investing across available strategies spreads risk and acts as a hedge against loss incurred in one property segment. Building a portfolio on one type of property investment is risky. Any negative impact on the segment may adversely affect your overall portfolio. Investing across new property investment options is a good idea, but it should not be similar to your existing portfolio. This is necessary because if the market turns for the worse, it is likely to hit specific investment strategies, and diversification reduces the overall portfolio loss. It is common for new investors to focus on one type of property which multiplies the risk in case things go wrong in one segment of the market.
As the property market is divided into submarkets, and all of which may not be affected at the same time or may not be affected equally, diversifying the portfolio reduces investment risk. Each property sector can go up or down, investors can spread risk evenly across investment markets as they are independent of each other. Though overall market condition may influence the property sector as a whole to some extent. Diversification helps investors avoid the worst of market downturn within a particular investment class or location.
Conversion of commercial property to residential
Vacant properties offer a great opportunity for property investment UK as investors can convert commercial properties into residential ones. UK figures for vacant properties is high since the internet has taken its toll on the brick-and-mortar market. The rise of online shopping is fast reducing the number of physical shops as people are preferring online shopping instead of vising the physical marketplace. This offers an advantage to the would-be investors as they can buy a vacant shop and turn it into residential property. Although, this strategy may be a bit difficult to implement as there are planning and tax issues, the efforts are worth the potential gains out of the investment. but the advantages of the strategy weighs on the downsides as there is less competition in this investment as there will be few investors using this strategy.
In terms of investment, the vacant commercial properties may be a unique opportunity for earning potentially high returns on investment as these properties are centrally located within the city and people look for residential locations that provide easy access to work and amenities. Therefore, these former commercial properties have opened up a new kind of opportunity to investors. They can prove to be highly rewarding but you will need to work with an experienced developer for ensuring good return on investment.
Investing in HMOs
HMOs or Houses of Multiple Occupation is one of the best ways to ensure significant returns on investment. It is more profitable to rent out individual living spaces in a large property than renting out the whole property to one tenant. This raises the rental income out of the property as there may be more than one tenant per room. Moreover, the rent is charged on per tenant basis. This means more rent out of individual rooms which means higher rental income from the property.
Though, more efforts may be involved in case of HMOs in terms of maintenance of the property as it involves shared areas which are meant to be used by all the tenants occupying the property and the landlord may have to look after the shared areas. There may also be increase administrative costs of processing higher tenant turnover, and additional wear and tear but usually these expenses don’t outweigh the increase in income. Management of HMOs may also consume little more time compared with the traditional rental properties since tenant arrangements are more complicated. But if you can develop a lost-cost system for processing turnover, it’s usually worth it. So, definitely the efforts are worth the investment as the returns make it a viable option for investors.
Holiday lets are among the most profitable types of property investment strategies in the UK and provide potentially high rental income. However, location of the holiday home holds the key to return on investment. All the holiday locations may not attract the same level of tourist numbers. There may be more popular locations, whereas others may not be so popular. Moreover, seasonal trend is one of the most important factors as some locations may be season-specific and may not have high occupancy levels outside of the summer months.
But, holidaymakers are often prepared to pay high rents for short stays as they look to avoid high costs of staying at hotels. Holiday home rents are also high for short stays compared with those for a residential let. But the location of the property should be chosen appropriately because, otherwise, you may struggle to repay the mortgage. However, you can attract customers during the off-season by offering discounts. Apart from this, you can promote the property on popular holiday home websites to show availability and use positive customer reviews.
This article is for information purposes only.
Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.
There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.