Despite how profitable and ideal property investment is, it’s important to learn as much as you can about this investment option before diving in, properties to invest in.
One factor that determine your success in property investment is the properties you invest in.
In the next few minutes, we’ll discuss the best property investments, how to start with them, and also point you in the right direction for live property investment opportunities.
Why Property Investment? A Quick Recap
Many investors see real estate investing as one of the best investment options. It’s not surprising because real estate possesses several beneficial features. For example, the right real estate investment increase in value, can generate rental income when given to tenants, and qualify as valuable assets.
You can invest in property with small or large amounts and even further diversify your portfolio with real estate investing.
As far as risks, most investors cope fine and make good profits. So a decision to invest in property can hardly be wrong.
Of course, different people perceive property investment differently. In the UK, individual ownership is highly desirable while in places like France it’s not so important.
What Makes a Good Investment Property?
Not every property is good to invest in just because its real estate. You have to look for specific requirements that will make your investment successful and sustainable. This applies regardless of if you’re buying raw land or an already developed property. Some of these requirements include –
Location
This is the most obvious. Ensure your UK property is in the right location to attract the right tenants and future buyers. Still, the location can change over time and increase real estate value or profits or decrease completely. Here are some mini factors that influence what the right location choice should be;
- The neighborhood – What you’re considering here are the type of people that already stay in that area. For example, a rental property near a college will attract many student tenants. This also means there will be times when the rental property stays vacant when school is not in session.
- Other facilities around – It’s important to look at other facilities around the property you hope to buy. If you’re investing in family-sized homes, for example, the quality of the local school district can affect the value of your property in sales or rental. Excellent facilities around can enhance value likewise poor ones reduce value and so on.
- Taxes – Never forget how taxes can creep up on you as a problem. UK property taxes vary widely by area and it’s critical to find out how much you will give away to taxes as an investor in that area. You can ask other homeowners or visit the municipality’s assessment office to learn about this.
- Safety – These are factors a renter or buyer would consider when considering your property. So you want to cover all of this ahead of time to secure your investment. Check for crime rates in your target location, including serious or petty crimes. Find out if the residents feel completely safe or have to deal with certain criminal activities. See if authorities are working on any safety issues in the area.
Condition of the property
The last thing you want is to fall into a situation where you realize that your cash cow is actually a money pit. Be wary of deals that are too good to be true. Check that the property is in good condition or at most needs minimal repairs. Have an inspector check the entire building and don’t hesitate to find other options when you discover a property is not in the condition you desire.
Even with a property in seemingly good condition, think about the maintenance and costs.
Capital growth potential
In a nutshell, what makes a ideal investment property is its growth potential. Other factors matter simply because they influence this growth potential. Is there a guarantee of future income on the property you’re targeting? How fast can it generate a rental income? Is it in rental demand? What condition will the property be in when you plan to sell? If you can’t figure it out on your own, seek help from experts to make sure you don’t make costly mistakes.
What market trends say
While real estate is evergreen, it’s easily affected by market trends. One moment your UK property in that ideal location could be hot on the markets and the next it’s grown cold and undesired.
Market trends to keep in mind include –
- Future development. How will this environment change in the next few years of your ownership? Is there more construction and growth happening in the area? Will certain developments favor your property investments or not? Will you experience capital growth with the developments?
- Average rent. Since rental income is such a common and dependable way to make money in real estate, you should always consider factors that affect it too whether or not you’re planning to rent soon.
- What is the average rental income in your target area? This will determine your rental fee and you will want to check that the amount can cover mortgage payments, taxes, and other expenses with a rental property.
Property management
Even when you’re a hands-on investor, you need to have a clear picture of property management for your UK property. This factor can make or break the profitability of your investment. If you have your hands full or would rather not carry the headache of property management, start looking at the experts you can hire. Check costs, proximity, and so on concerning a target property.
When taking up the property investment venture, you can ensure success by not choosing with emotion. Use logic and knowledge. A good rule of thumb while purchasing the property is to imagine if you were the tenant, buyer, or later investor for the property.
The Best Property To Invest In
In this section, we will go in depth on the best type of property to invest in. Overall, these properties have unique advantages and disadvantages, including positive cash flow. The ideal property for you will depend on which property type best appeals to your budget and capability as an investor.
Residential Property
Residential real estate investing is the most common type of property investment. The reason being that they turn in profits consistently and are often in demand – see other reasons below. This type of property investment is best for many investors regardless of if you’re new or seasoned.
You will have to develop residential real estate investing strategies that work for you to make money and take advantage of possible reduced taxes. Exit strategies here include wholesaling, rehabbing, and buy and hold properties.
Why choose residential buildings?
Higher and consistent income
Residential properties have evolved to accommodate more facilities than ever before. With this and increased options for an ideal location, it’s easy to find tenants for consistent rental income and enjoy price appreciation on your property.
Stress-free purchase
Purchasing a residential property is much easier and stress-free than other property types.
You skip having to wait for property approvals or go through several legal steps. There are more than enough real estate companies to help you with a convenient home buying process with residential real estate. Then you can choose to buy to let or to live in.
Better predicted growth
Buy property as an investor only when you can predict capital growth. Residential real estate is one of the most favorable in that area because reports over time have shown that people prefer to buy homes than other property types. It can be expected since the need for housing will always be in demand. Purchasing a home gives a sense of security more than other investments.
Less maintenance
Depending on which residential property you buy, you might avoid worrying about maintenance. Some housing complexes take care of maintenance.
Tax benefits
Tax benefits are often the sole reason many people invest in residential buildings. The money made from a rental property is exempted from self-employment tax. You won’t also have to deal with direct tax or others that affect commercial properties. To be sure, always consult an expert before you buy property in an area.
Residential units include duplexes, multifamily homes, vacation homes, and Airbnbs. We will discuss some of the best options below.
Multi-family homes
Some say that multi-family homes are the best way for a new investor to get started. The idea is that despite the large mortgage payment on multi-family homes; you get to have more tenants because it has over one property unit. More than one tenant means more money and steady growth.
Then there’s the maintenance cost. It’s easier to deal with maintenance in multi-family homes because you save money by fixing one overall problem than many smaller ones. For example, if the roof is leaking in your multi-family property, you would repair one large roof covering more than one tenant instead of two or three roofs over separate buildings.
Multi-family homes also have a high chance of maintaining their value.
Detached single-family homes
The key here is to find a great deal to ensure regular income and avoid having your money tied down.
Single-family homes are the easiest rental properties to understand because you may already stay in a similar home. The process is to rent the home to a single family. It’s great for new investors and for finding long-term tenants.
But it’s important to note that as easy as single-family homes sounding getting a good deal can be difficult.
Airbnb Rental
Flexible and ideal for your investment portfolio or property portfolio is how we would describe this type of residential real estate.
An Airbnb rental can be of any home structure or type of your choosing. All you have to do is find a property with high rental demand and rent it out for impressive fees. The biggest problem with Airbnbs is the maintenance cost and stress. Once that’s under control, you will have a profitable investment on your hands.
Mobile homes
If regular house prices scare you or you simply don’t have enough cash for bigger real estate investing, a mobile home can be a dream come true.
With this option, you enjoy low mortgage payment, the lowest amount of maintenance, and the most lucrative part of this investment – the land the home sits on.
Townhouses and Condos
Townhouses are small buildings common in urban areas. While they are cheaper and slightly different from single-family homes, it all depends on the housing market.
Condos are highly desired by new buyers looking to buy a property. It’s best for large real estate investors trying o diversify their property portfolio. You could make more money from selling multiple condos.
Commercial Property
Depending on your approach and strategy, commercial real estate can be one of the best properties to invest in.
It is characterized by higher income potential, longer leases, and lower vacancy rates than other real estate options and can be a big commitment.
Examples of commercial real estate are retail buildings, office buildings, warehouses, industrial buildings, apartment buildings, and “mixed-use” buildings.
The benefits of commercial property investing
High-income potential
Investors can make the most money on these types of properties. This is influenced by the long-term lease agreements with commercial properties. Long-term tenants mean regular income and enough cash regardless of how badly an economy fluctuates.
Great tenants
Since tenants are mostly business owners, it’s easy to maintain professional relationships and have fewer problems. They want to protect their business by maintaining an inviting environment and consistent address. Lots of landlord prefer to rent spaces to only business owners.
Net lease options
With this type of property, you can sign a single-, double-, or triple-net lease agreement with the tenants. This is a flexibility you don’t get easily with other property types.
In addition, commercial real estate helps improve local communities and contribute to the economy.
Let’s take a closer look at some commercial real estate options
Office buildings
A good location is vital for the success of commercial office buildings. These buildings have to be as modern as possible with up-to-date technology to get tenants and high profits. The lease for office spaces usually extends between 3 to 5 years. A good tip is to rent to tenants with a good track record in business. Their growth will impact yours.
Retail buildings
How has shopping evolved in your country? This is the question you want to ask before digging into retail buildings. Know that most shoppers may prefer local retailers to large shopping complexes. And that retail tenancies can be riskier than other commercial options because of new business failures.
Like office buildings, retail buildings use fixed rental agreements for up to 3 years.
Industrial buildings
Industrial buildings require a range of research and development space to vacant warehouses. Cleaner, newer, and well-constructed buildings have higher demand. The low prices associated with smaller factories allow an average person/investor to enter this property sector.
Raw land & New construction
You can diversify your investment portfolio by investing in raw land or new construction. Raw land is one of the most profitable real estate investment choices in terms of projected growth. You can choose to develop a property from scratch to complete or buy and hold for long-term profits.
However, you must perform extensive market research to get your purchase right.
Benefits of raw land investing includes –
- You can choose to buy and hold
- They have great potential for passive income or quick profit
- Easy to acquire
- There’s less competition
- Ownership and maintenance cost less with these options
Some of the best raw land investments are commercial or residential land investing, row crop or livestock land investing, and small farmland investing. Success investors make money with raw land using tips like;
- Property development on raw land to increase use and value
- Dividing a single plot into several plots to increase value. In this situation, each plot can be sold or developed separately.
- Leasing the land to collect rent. You will be surprised as property markets open for renting raw land.
- Simply buying and holding raw land for value appreciation.
New construction differs from raw land on many levels. Firstly, unlike other property investments, new construction is brand new homes you buy directly from the builder or developer.
Benefits of new construction include –
- They are easy to find in an upcoming property market or profitable locations.
- They are in high demand because people love new homes
- New construction homes or buildings can generate instant equity.
- Ideal for less-handy property owners since they require little to no maintenance and repairs.
- You can customize as you wish to cut costs.
- New construction homes or buildings can sell faster by working with the builder’s team
The strongest drawback of raw land and new construction is the waiting game. Sometimes demand could be high when supply is low. Other times it can be the other way round.
How Do I Start Investing In Properties In UK?
Buy the traditional way
You can start investing by buying a UK property. This property can be the home you live in or a buy to let property. Living in the property gives you only one way to make money from it which is an increase in value. This in turn means you plan to sell in the future.
While buy to let gives you two ways to make money from your property – passive rental income and increased value.
Risks with buying property directly –
- You leave money tied up because it takes a long time to sell
- Maintaining and managing a property takes time and money and if you don’t own the property outright, taking any action takes time to negotiate
- Buying a property directly is a big commitment as it demands a good amount of spare cash
Buy via the stock market or investment property funds
This brings us to Real estate investment trusts (REITs) which are one of the most popular ways to invest in property. REITs distribute 90% of their property rental income to investors as dividends.
There are two types of Real Estate Investment Trusts to focus on – open-ended REITs which don’t have a specific number of shares. Shares in open-ended REITs are created when buyers join the trust. The other is closed-ended REITs which have a specific number of shares.
REITs are also one of the indirect property investments options. Others in this category are property funds, property investment trusts, and property unit trusts, and OEICs.
How can I invest my real estate in $500?
The most effective way to invest in real estate with $500 or other small amounts is through crowdfunding. Property crowdfunding allows many investors to purchase shares of a property with others. Several crowdfunding sites do this.
You can also consider property lending where investors come together to loan money to a company or individual using a property the borrower owns as collateral.
With either of these low-cost options, you still risk loss if the property value drops.
A Quick Guide To Investing in Properties In the UK and Abroad
Research the market
Beyond this article there’s still much research to do with the best properties to invest in. decide on an area you want to buy and look at factors that affect real estate growth and value such as the local jobs market, the availability and performance of local schools, the profile of the population, the local employers and economy, and – for commercial buildings – the availability of commercial rental space. Discover the rental prices and if they are increasing or declining.
Have an exit strategy
An exit strategy is a plan for when things don’t go your way with the investment. They mostly include choosing to sell the property. Depending on the condition of the property, location, and more, you can create a solid exit strategy.
Know the expenses involved
Even the best properties to invest in can’t escape certain expenses. In the UK, you can expect expenses like –
- solicitor fees
- estate agency fees
- stamp duty
- setting up insurance
- Land Registry fees
- mortgage fees
- surveys
there are also,
- Auction fees
- Mortgage interest costs
- Buy-to-let insurance
Ongoing expense after purchase may include –
- Corporation tax on any profits generated
- Council tax or business rates if not paid by the renter
- Ground rent if leasehold and not paid by the renter
- Buy-to-let insurance
- Deep cleaning in between tenants
- Rental management company fees
- Maintenance and repair costs
Let’s not forget the costs when you sell the property –
· Capital gains tax
· Legal costs
· Estate agent fees
What determines the property you should invest in?
The first step is to always weigh the risks versus the rewards. For example, with a rental, you gain a passive income, which is a good reward. But then, tenants can be troublesome. Your interest on an investment property loan is tax deductible but your entry and exit costs can be high.
Do this for each type of investment before also considering your budget, returns, location, experience, and so on.
Investment Opportunities: Property with CrowdEstate
Tulbiõie tee, Viimsi vald
Details:
This project is a new Tulbiõie residential development in Viimsi municipality, close to Tallinn, Estonia. It contains 8 semi-detached houses (16 units) and 4 private houses. The expected rate of return is 19.5% p.a. with 537 investors, and a €990 000 goal.
This property has a project duration of 30-34 months.
The estimated sales price of a box in a semi-detached house is 340,000 euros, a one-family house 450,000 euros. In total, the sales revenue of the project would be 7.24 million euros with an expected net profit of 780,000 euros.
Jaunas tujas (II)
Details:
The aim of this project is to create a residential village. The loan goal of €150 000 is to partly refinance existing liabilities and the next tranches will attract funds needed for development stages.
This is a short-term investment opportunity. The principal and interest payment will be done as a bullet payment at the end of the 12-month loan period. Its expected rate of returns is 10% p.a. and 248 participating investors.
For more opportunities take a look at CrowdEstate’s homepage.
Final thoughts
There are several properties to invest in on the market. But not every investment makes a good one. We have discussed a great deal of what is involved to give you insight and some direction.
As indicated above, you can start your investment with small or larger amounts of money depending on your capability. Work with experts in whatever property investment method – buy, sell, or lease – you choose to guide you.
Keep in mind that real estate investing is never completely risk free, so make sure to only invest spare cash. Returns also take a while to come in, hence patience is key for a real estate or property investor.
Start investing right away with as low as 100 Euros with CrowdEstate.
