Most people think that investing in properties is simply buying real estate and then renting it out or selling it to someone else for a higher price. But it’s much more than that. Any property investor will tell you that the most important thing you need to be profitable is a good strategy.
Let’s say you’re from the UK and thinking about investing globally, there are quite a few property investment UK-based services that could give you expert advice and teach you some important strategies for doing so. These strategies are the most widely recognized in the market and can help you get the best results.
Buy to sell
One of the most common property investment strategies is the one where you buy a house or an apartment, renovate or “flip” it, and sell it at a higher price for a profit. It’s a good strategy if you’re looking for short-term gain and a quick profit.
It’s important to state that this type of investment requires a lot of money, especially since home prices increased a lot recently. They jumped 11% in 2020 alone, and this isn’t the only cost you will have to think about.
You should also consider that money will go into the cost of renovation and you won’t have any passive income. If done incorrectly, this strategy can result in a great loss, but if you have potential buyers or if the property market is in good standing, it’s a great way to make a quick profit.
Just make sure to think about the financial preparations for real estate investment on time.
Another popular tactic in the investment world, off-plan investment involves purchasing a property before it’s even finished construction.
So, why choose off-plan?
When it works, it can be a rather lucrative and rewarding investment, offering a huge amount of potential for those who wish to increase their cash flow over time.
In theory, once the property is built and your tenants are all moved in, you should be able to kick your feet up and relax as you receive a steady stream of income via monthly rental payments.
The main benefits of off-plan are:
- Properties are often priced at below-market value rates as an incentive to offset any doubts. For those looking to get more for their money, exploring off-plan investments could be something worth looking at.
- Because these properties are new builds, they’re in high demand from renters who want a brand-new property with contemporary designs and features.
- Property investors who buy off-plan property can choose to invest in a wide range of units in one development. This is a luxury not usually available to investors, allowing many to enjoy the freedom of off-plan and cherry-pick the best units.
- There is also strong potential for attaining capital growth as the property grows in value over the construction period. Because you’re buying at a discounted price, this can result in remarkable growth before the property is even finished. You can then either choose to immediately put the property up for sale to make a profit – ideal for those wishing to see returns quickly – or tenant the property over a long-term period, which will see much more capital appreciation alongside the added benefit of regular rental income and increased value.
However, as with any venture, there are some risks alongside the rewards.
Some of these may include:
- Property prices can fluctuate depending on housing market performance (although keeping up to date with the latest trends, as well as any other basic research can help combat this),
- The project could take longer than anticipated – which is, to be honest, rather common – given the complexities of building a property.
If you’re smart, though, and play your cards right (i.e., research properly), you may find off-plan to be the best possible strategy to fit all your investment needs.
You’re probably familiar with house shares, which are also known as houses in multiple occupations (HMO). This type of property investment is big and in it, you rent out each room to separate tenants. This type of investment strategy is very popular because it brings in high rental income.
There are many benefits to HMO investing aside from making more money from more tenants, and the biggest one is diversified rental streams.
In regular renting properties, when your tenant leaves, you have no income left. But with HMO investing, when one tenant leaves, you still make a profit. Additionally, if you invest in HMO in the UK, you can expect an average 15% realistic gross yield.
However, you need to keep in mind that when you rent out to multiple people, the chances of necessary maintenance will certainly increase. And since HMO properties are usually rented out completely furnished, there is a bigger chance for wear and tear on your furnish.
Real estate investment trusts
Finally, if you’re looking for a hands-off investment opportunity where you won’t even have to purchase and manage a property, consider a real estate investment trust (REIT).
A REIT is a trust or company that owns property like retail properties, apartment blocks, or office blocks, and they can be private or public. By investing in a REIT, your returns will be similar to the returns someone gets when they buy stocks.
It’s better to invest in a public REIT because they’re subject to many regulations and are usually a safer investment opportunity. If you’re looking to invest in real estate, but aren’t willing to manage a property, deal with the selling process, or answer to renters, this is a great strategy.
However, keep in mind that REITs aren’t very profitable. They usually deliver lower returns than the other strategies we talked about but are a great way of making some extra money on the side. Still, you won’t be able to count on a REIT as your main source of income.
Property investments have always been popular because they bring in a lot of profit without too much work. The strategies you just read about have their pros and cons, so whichever one you choose, make sure it’s the perfect fit for you.