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The Best Type of Property to Invest In and Where
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Knowing which is the best property investment in the UK can be difficult. In case you didn’t know, investing in property has long been considered one of the safest ways to grow wealth.
But with so many options, how do you decide the best type of property to invest in and where? To learn more about finding the right property to invest in and the best locations to consider, continue reading.
Reasons to Invest in Property
Various forecasts predict that house prices will rise between 2% to 4% in 2025. This means purchasing a property in the UK sooner rather than later will be the best decision. But why else should you invest in property?
- Long-term capital growth
- Potential for resale at a higher price
- Diversifies your investment portfolio
- Provides stability compared to volatile stocks and shares
Property Types to Invest in
With so many investment opportunities available, we understand it can be overwhelming knowing which is the best type of property to invest in – especially if you’re new to the scene. However, not to worry, we’ve found the best property investment types to consider:
- Traditional Buy-to-Let: This involves purchasing residential properties to rent out to tenants, proving to be a popular investment for its potential for a steady income and capital appreciation
- Hotel Rooms: Involves purchasing a room in a hotel and earning a share of the rental income. This investment type tends to work best in high-demand tourist areas and offers a more hassle-free approach to investing, with great passive income
- Student Accommodation: Specifc accommodation for students that’s most in-demand across towns and cities home to universities. Investing in student housing often provides high rental yields and repeat occupancy rates, but there is a risk of students causing high wear and tear
- Holiday Homes: Homes that can be used for vacations, business travel, or as a non-permanent place of residence. These investments offer the potential for high rental income during peak seasons but also experience longer void periods, require more management, and face a competitive market
- Houses of Multiple Occupancy (HMOs): HMOs involve renting out individual rooms within a property to multiple tenants, and although they can maximise rental income and reduce the impact of void periods, they have more complex regulations than regular rentals
- Co-Living: Properties catered for a younger audience with shared living areas and private bedrooms. They offer high rental rates, as multiple people will be living in the property together
- Off-Market: Properties that are not yet listed publicly and often acquire below-market prices. They require strong market knowledge and networking to avoid the competitive bidding that often occurs in the public market
- Off-Plan: Properties purchased before being built. They offer significant capital growth if the property value increases during the construction period but also pose development risks, such as delays (which, of course, limit rental income)
- Build-to-Rent: Developments that are purpose-built properties, designed to cater specifically to renters with amenities that attract much longer-term tenants
- Assisted Living: Properties catered for the elderly, providing specialised care facilities. This type of investment offers stable and increasing demand with our ageing population
Which Property Offers the Best Return?
Ultimately, knowing exactly which property is best to invest in is difficult to pinpoint. However, there are two key areas to consider which will help decipher which property could offer the best return:
- The potential for capital gains on the property
- The rental yield of the property
But what are capital gains and rental yields, and how do they help you make a more informed decision in finding the best property investment?
Capital Gains
Capital gains refer to the profit you make when you sell a property for more than you paid for it. This metric indicates the potential for your investment to appreciate over time.
For example, if you buy a property for an average price of £300,000 and sell it for £350,000, your capital gain is £50,000.
Rental Yield
Rental yield is the annual rental income expressed as a percentage of the property’s purchase price. It helps you, as an investor, gauge the potential return on your investment property. It’s important to understand rental yield to evaluate the ongoing return from rental income relative to the property’s cost.
For example, if property prices are £200,000 and generate £10,000 in annual rental income, the rental yield is 5%.
Top 5 Regions in the UK to Invest in Property
According to Halifax, anything from 5% to 6% is considered a good rental yield, and anything above this mark is considered very good. Rental yields in the UK differs from location, with some areas delivering much lower returns. Typically, lower-yield areas are where house prices are priced at high amounts.
So, what areas have the highest rental yield to consider buying property in? Let’s find out.
| Area | Rental Yield (roughly) |
|---|---|
| Liverpool | 7% plus |
| Glasgow | 7% plus |
| Newcastle | 7% plus |
| Manchester | 6% plus |
| Preston | 6% plus |
What to Consider When Buying a Property
To ensure you’re making a wise property investment, we advise considering the following factors:
- The neighbourhood and its value
- The area’s crime rate
- Property taxes to determine profitability
- Current local job market to attract rental appeal
- Nearby education options to attract long-term families
- Future development opportunities to boost property value (i.e. gentrification)
Ready to Invest?
At Peninsular Property, we boast over 30 years of experience in helping investors find the best property opportunities to strengthen their investment portfolios.
Our team of property market experts provides support and guidance during all stages of your investment, from market research to property management, ensuring you can safely invest in rental properties with peace of mind. Whether you’re new to property investments or looking to expand your property investment strategy, rest assured we can help.
Start your investment journey today. To further discuss our services and how we can achieve your property investment goals together, please contact us today.
Common FAQs
Deciding whether to invest in off-plan properties offers both pros and cons – they offer significant returns if property values rise during construction, but also carry risks such as construction delays and market fluctuations.
Buy-to-let remains a popular investment due to its potential for steady rental income and capital appreciation. However, it requires careful management and market research.
Yes, student property offers high yields and consistent demand in university towns. However, it may require more hands-on management and potentially higher property maintenance costs.
Investing in holiday homes can provide high rental income during peak seasons but may have longer void periods and higher management costs.
The most profitable property types often include HMOs, student accommodations, and commercial real estate. These properties can yield high rental returns and benefit from strong demand. However, profitability depends on market conditions, location, and effective management, meaning thorough research and planning is essential to maximising returns.
For first-time property investors, traditional buy-to-let investment properties are ideal, as they offer a straightforward entry into property investment with manageable risks. If you’re a first-time investor, focus on properties in desirable locations with good rental market demand.
