What is Property Investment?
This is a property purchased to generate revenue through rental income or capital gains. Yet whether or not income-producing real estate is a good idea, is a matter of personal choice, but here’s what hard data implies:
- Right now, the UK property market is presenting a wealth of opportunities for investors. According to Savills, house prices are expected to grow by 3.5% in 2022 due to economic growth and a shortage of homes.
- Property is a long-term investment and another reason to invest in property in 2022 is the fact that UK rental prices are set to increase by up to 17% by 2025. For those looking to purchase an income property projections indicate growing capital growth opportunities in the coming years and house prices could be up by 13.1% by 2026.
What are the Benefits of Having an Investment Property?
One of the main attractions of buying rental property is that you can earn income each month. Rental income is not only recurring but requires relatively little effort to maintain. The best property is one that can cover its own expenses (mortgage repayments, repairs, management fees etc.) so it’s cash flow positive.
Capital growth, or in this case real estate appreciation, is another upside of buying an investment property. The long-term trend is that investors who choose the right property can enjoy significant capital growth in the medium to long term.
How to Find Income-Producing Real Estate
To find the best money properties out there look for markets that will give you the best return. By ensuring you invest in properties that give you a good monthly income and appreciate in value over time you’ll minimise the initial risk of your investment.
Here are a few property investing tips to keep in mind:
- Look for Growing Population
Ideally, you’ll want to research areas where there is a growing population. Population growth leads to an increase in demand for housing, which is good news for landlords.
- Look for Positive Economic Growth
Make sure the job market is steady and the economic outlook is positive. Cities undergoing regeneration that are receiving investment are all good indicators that property will be in demand and that the housing market is likely to grow.
- Look for Tenant Demand
Understand your target tenant demographic, and make sure your property is the type and in the right location. UK university towns will see high demand for student accommodation while young professional rental demographics often seek apartments in the city centre. It’s important to understand what’s driving the economy and where growth is headed so you can find ideal property for your tenant base.
Best Places to Invest in UK Property
While the UK property market is on a general upward trend, certain cities and towns are expanding more quickly than others.
From a regional perspective, according to Savills, house prices in the North West and Yorkshire and the Humber region are expected to grow around 18.8% by 2026. With the Government’s investment agenda, the north-south divide in housing prices looks set to close over the next 5 years, and looking to cities in the north could deliver great opportunities for investors.
For example, with a growing economy and job opportunities, Leeds is one of the UK’s most in-demand property markets. Properties in the sought-after Southbank Project range from £145,000 with just 20% deposit. With rents tipped to rise 18.8% by 2024, Leeds is a property goldmine for investors.
Another strong market in terms of economic growth and rising house prices is Birmingham. Property prices are averaging £214,696 for 2022 and rental yields are 6.56%, making the UK’s second city a prime investment destination for 2022.
At 6% through 2025, London is expected to have the lowest house price growth in the UK. However, pockets on the London commuter belt offer plenty of potential. Bracknell is just 50 minutes from London by train and has earned the title as the number one location for future property price growth in the South.
Property prices in Bracknell are around 50% less than the capital and completed and tenant-ready properties can be purchased from as little as £182,475. Thanks to a £770 million regeneration scheme and job opportunities with the likes of tech giants like Dell and Microsoft making Bracknell their home, property prices and rental prices are set to increase 17.5% and 8%, respectively over the next 4 years.
To conclude, an investment property is definitely a good idea when you do it right. When it comes to investing in real estate there is no catch-all approach. Deciding whether to invest in property will come down to your unique situation, however, 2022 is presenting strong opportunities for investors in the UK property market.
What qualifies as an investment property?
Investment properties are those you plan to hold for a medium to long term basis to generate income or gain capital appreciation. A property bought to fix up and flip wouldn’t come under this category, as you aim to sell these properties quickly for a profit.
Can you buy an investment property to live in?
Due to Financial Conduct Authority (FCA) regulations around residential and landlord mortgages, it’s not possible to live in your income property. Usually, buy-to-let mortgage contracts stipulate that the customer will not live in the property.
How many properties do you need to live comfortably?
There’s no limit on how many investment houses/flats you can own. A single property can deliver a solid stream of monthly passive income. However, owning multiple properties with multiple income streams and opportunities for capital growth can set you up for a secure financial future.