UK Buy to Let: 5 Key Strategies

Investing in property may seem like a daunting prospect if you’re unsure of the process behind it. It is likely first-time investors will feel overwhelmed – especially with all the jargon and terminology surrounding the property investment process.

Over the past couple of years property investment has grown in popularity as it has increasingly earned the reputation of being a somewhat stable investment asset compared to others.

This does not mean it is without its pitfalls, however – there is a degree of risk to every form of investment. This guide is intended to look at the pros and cons of what are considered the five most popular UK property investment strategies to allow for a more informed decision.

Let’s get started!

Single-Let Residential Property

Perhaps the most traditional and popular form of property investment in the UK – a ‘single let’ property is housing that is rented to a single ‘tenant’ which can be compromised of an individual person or an entire family.

Pro’s

• Perfect for beginners as you don’t need expert knowledge
• Allows for two types of returns through both rental returns and capital growth returns when the property is sold.
• The option to hire a rental management company makes for a less time-consuming option.

Con’s

• This is primarily considered a long-term investment that accumulates over time and would not be appropriate for those wanting to make short-term returns.
• If you’re investing in areas without high rental demand, you may be subject to void periods.

Student Accommodation

Recently growing in popularity across UK cities is investing in purpose-built student accommodation – the main distinction here is that the property will be let out exclusively to student tenants.

Those who have already invested in student property have been keen to seek out cities with a thriving student population such as Liverpool and Manchester, In turn, a high graduate retention rate ensures that demand will remain steady.

Pro’s

• High and consistent rental demand owing to the booming student property market.
• Student property prices tend to be lower which makes it a good option for first-time investors.

Con’s

• May not be subject to as high capital growth returns in contrast with residential buy-to-let.
• Student property investment will always be limited to one tenant group.7

HMO’s

Pro’s

• The multitude of tenants allows the chance to generate income from each one which will result in higher rental yields.
• If one tenant misses a monthly rental payment, you will have the other tenants fall back on.

Con’s

• HMOs are subject to more complex tax rules and regulations as well as planning and legislation requirements.
• It can be difficult to obtain a buy-to-let mortgage for HMO properties.

Buy To Sell

Instead, it focuses on a strong property market to ensure that the property, once redeveloped, will draw a high level of returns.

Pro’s

• If you can add value to the property, there is much potential for making large rental returns
• There is no hassle of dealing with tenants or property management regulations.

Con’s

• As it is a very hands-on form of investment, buy-to-sell is a very time-consuming venture that requires a certain level of expertise
• Depending on the degree of renovation needed it could be quite costly.

Commercial Buy to Let

Commercial Buy to Let is more subject to the whims of the market, however – financial hardship can damage commercial businesses which is something potential investors should be particularly mindful of.

Pro’s

• Commercials Buy to Let will feature certain tax advantages and incentives.
• As they hold longer lease periods there is potential for better long-term gains

Con’s

• It may be time-consuming to find the right tenant so commercial buy-to-let will be subject to longer void periods.
• Buy-to-let mortgages for commercial property tend to be more costly than residential ones.