How To Make Money From Property In The UK
With the UK property market now thought to be worth £7.56trn, it’s understandable that investors both on a national and a global scale are interested in getting their slice of the pie.
Add to that the quality of the infrastructure here, more demand than supply generating high rental yields not to mention the melting pot of locations for investors to explore, and the UK continues to be an attractive prospect.
The question is though, what are the ways of making money from UK property specifically, and more importantly, which method is going to be right for you as an investor?
In today’s post, we’ll be breaking this quandary down, so that you can make an informed investment decision.
Appreciation of existing property
Anyone who currently owns property will find that property as an asset class is considered one of the safest forms of investments, particularly in terms of tangible assets.
While property prices are reactive to market activity, on the whole, the value of property rises each year in line with inflation, which at the time of writing stands at 2.9%.
The main difference with making money from property you already own, is that a healthy return certainly won’t be reached overnight unless planning significant renovation or improvement works. The exception being if the property was purchased some time ago, meaning it has likely increased in value since its purchase date.
Though, many property owners take comfort from owning an asset which at one point they can choose to sell to fund their retirement or leave as an inheritance, rather than wanting to make a large profit in the immediate vicinity.
- Increased value is something that the majority of property owners will benefit from, without necessarily having to put in a determined effort
- Easy to track general value of area and inflation to calculate investment
- Properties in up and coming areas can see the most dramatic rises in property prices
- Can decide to sell at any time, allowing property owners to capitalise on a strong market
- Property owners live in their investment, or can choose to let it out
- Property prices are constantly rising, making it increasingly difficult to get on the ladder as a first time buyer if you haven’t already invested
- Unless making significant improvements to your home, a decent price increase can take years to come to fruition
- Value may be decimated if the property is damaged beyond repair i.e by fire or flood
- Property increase may stagnate or even decrease if the area becomes undesirable over time
- Once you sell, additional charges such as legal fees, estate agent fees and Capital Gains Tax will apply
Renovating a property with an eye to increasing its resale or rental value is another form of earning money from property in the UK.
The general ethos here is ‘buy the worst house on the best street’, as such properties are considered to have the most untapped potential where value is concerned, if the renovator can bring the standard up to match nearby properties.
Increased value aside, the process of renovating can be hugely satisfying, especially when dramatic before and after pictures are compared. Though of course, getting to that end stage requires a lot of elbow grease, which can bring with it a lot of stress especially if new problems are discovered during the work causing the budget to run over.
Therefore, renovating makes for an ideal way to make money from UK property for investors who enter the process with all of the associated pitfalls in mind. Knowing what to expect and how to deal with potential issues will keep the project not only on track but worthwhile for all those involved.
- Doer-up properties typically have a low purchase price
- Particularly ideal for anyone with an existing trade or experience within the building or interiors industry
- Renovation projects are usually well received by local residents and authorities, as it is seen as a boost to the whole area
- Rental yield or resale value increase will be realised much sooner
- End result can be extremely satisfying
- Not for the faint hearted, as renovation requires a lot of time, effort and graft
- Can be difficult to calculate true costs involved which will ultimately impact your ROI
- The process may take many months if not years to complete, depending on the scale of works required or planned
- Planning permission may be needed for more ambitious plans
- May not be able to live in the property while work is taking place, which may incur additional rent/mortgage fees
- If you plan on selling or letting right away, you’ll need to find buyers or tenants
We’ve approached the option which no doubt will be met with a sharp intake of breath, and that’s to become a property developer. Quite literally starting with a blank canvas, property developers purchase a plot of land and draw up plans to build either one or a series of properties.
Alternatively, property development can also involve the redevelopment of an existing building too, such as our 98 Baker Street London development, which we currently have investment opportunities for.
There’s certainly a lot of profit to be made with property development, though in return the level of commitment is the highest of any property money making option. Developers are responsible for overseeing every millimetre of the build including everything from seeking planning permission to working out costings, managing personnel and timescales, and even choosing the materials and finishes.
Therefore, this option isn’t suited to those who lack the capital, experience or time to create a building that not only meets regulations but will generate a healthy return on investment, as a place where people will genuinely want to live or work.
- Often the biggest earning potential, especially for larger developments
- Opportunity to have a hand in shaping the local skyline
- Redeveloping existing spaces, particularly in prime locations that have fallen into disrepair is welcomed by community and councils
- Can choose to live in the property now or at a later date
- Help to buy schemes are geared towards newer developments widening the potential tenant pool
- Requires significant capital investment
- Best suited to those with expertise in the building and construction industry
- New build developments aren’t always given a welcome reception by residents, especially if looking to build on recreational spaces
- Resale or rental value dependant on the location
- High potential for timescales and budgets to overrun which will impact your investment
- The properties need to be sold or let once completed
- Locations of available plots vary in quality and availability of local amenities
Don’t fancy rolling your sleeves up to build or renovate, instead wanting to keep things as a strictly financial arrangement? Investing in property as part of an existing or upcoming development is the way to go.
The options at your disposal are to buy outright or as a part ownership agreement, depending on your available capital and preferred level of responsibility.
Income for an investment property can be generated in several ways, including buy-to-let income and the eventual sale of the property.
The main advantage with this option is that investing cuts out many of the unknowns, since purchase prices and expected rental yields will be given to you upfront. In the digital age, it’s even possible to tour the properties virtually, as is the case with many of our investment opportunities, most recently including our Wolverhampton Central Apartments. This means that as an investor, you can get a feel for the types of opportunities that are available and calculate your potential profits, long before signing on the dotted line.
Some choose to manage the property themselves if letting to tenants, though a lettings agency can also remove the hassle for a small percentage of your total rental income, creating more of a silent partnership type arrangement. Though, you will still have ultimate responsibility for the property.
Investment opportunities are popping up across the UK, meaning you can invest in an area you are familiar with, or head to another location where the rental yields may be more attractive.
- Investment commitments range from a small percentage to the full amount, making this option suitable for investors of all calibres
- Option to ‘try before you buy’, through property open days, virtual tours, investor brochures etc
- Can research developers in advance which helps to ensure a sound investment
- Standard of many modern developments is exceptional, leading to fewer maintenance issues and tenants staying longer in their accommodation
- Property spans residential, commercial, hotels, student accommodation and much more, allowing for portfolio diversification
- Investment company acts as a ‘middle man’, so that you have someone to discuss the available options with instead of going it alone
- Can also choose to live in the property now or at a later date, making investing attractive to expats too
- No need to be physically present in the country or location, especially if a lettings agency is managing any rental contracts
- You are not responsible for any aspect of the construction process, instead purchasing the finished article
- Developments often have strong marketing campaigns making it easier to attract tenants versus going it alone as a newbie developer or relying on estate agents
- It’s imperative to do your research to ensure you’re working with a trusted and reputable investment company
- As with purchasing a property through the usual means, it may take some years for the resale value to appreciate
- Most investors purchase as a buy-to-let option, meaning you’ll be responsible for tenants, though a lettings agency can help manage your responsibilities as a landlord
- The most lucrative locations aren’t always in plain sight, i.e Liverpool, Sheffield, Hull, Preston, Newcastle and Birmingham offer fantastic rental yields yet are frequently overlooked by London-centric investors
To sum up
While we’d always advise seeking independent advice on any investment you wish to make, it’s fair to say that the UK property market has something for every investor, whether you’re starting small with your first doer-upper, looking to create your own vision through property development, or wanting to invest in some of the finest new developments in the UK, as we provide to our investors here at Thirlmere Deacon.
For any investors who are keen to purchase existing opportunities within the buy-to-let, student accommodation or hotel asset class, have you seen what we have to offer?
Thirlmere Deacon is a property investment company with offices in London and Dubai. We welcome potential investors to take a look at our current buy-to-let opportunities or scroll to the top of this page to view our investor resources.
If you’d like any further advice on anything we’ve mentioned above, or if you are considering investing in one of our opportunities, please drop us a message or call us on +44 (0) 2039507939.