The Best Type of Property to Invest In
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If you didn’t know already, investing in property has long been considered one of the safest and most lucrative ways to grow your wealth due to the benefits and options available.
But with so many options available, how do you decide which property type is right for you and your investment portfolio? This is exactly what we’ll cover in this blog to give you inside information so that you can confidently find the right property investment for you.
Why Should I Invest In Property?
Investing in property offers numerous benefits, including long-term capital growth, the potential for resale at higher prices, and passive rental income. It’s a tangible asset that can diversify your investment portfolio and provide stability compared to volatile stocks and shares.
How Do I Know Which Property Will Offer the Best Return?
There are two key areas to consider when it comes to knowing which property would offer the best return, and these include:
- The potential for capital gains on the property
- The rental yield of the property
Understanding these two factors will significantly help you make a much more informed decision when it comes to property. But what exactly do capital gains and rental yields mean? Keep on reading to find out.
What Does Capital Gains Mean?
Capital gains refer to the profit you make when you sell a property for more than you paid for it. For example, if you buy a property for an average property price of £300,000 and sell it for £350,000, your capital gain is £50,000. This metric indicates the potential for your investment to appreciate over time.
What Does Rental Yield Mean?
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.
For example, if property prices are £200,000 and generate £10,000 in annual rental income, the rental yield is 5%. It’s important to understand rental yield to evaluate the ongoing return from rental income relative to the property’s cost.
What Are the Top Property Investment Types?
With different types of investment opportunities available, you might be wondering, “What is the best type of property to invest in (UK)?” This can be very confusing, especially if you’re new to property investing, which is why we have provided easy-to-digest information below. Keep reading to learn about the different properties that you can buy:
Traditional Buy-to-Let
Traditional buy-to-let properties involve purchasing a residential property to rent out to tenants. This type of investment is popular due to its potential for steady rental income and capital appreciation. However, there is a risk of tenants damaging your property, which is where a letting agent’s expertise can help.
Hotel Rooms
Investing in hotel rooms can offer attractive returns, particularly in high-demand tourist areas. Investing in hotel rooms typically involves purchasing a room in a hotel and earning a share of the rental income. With the professional management handled by the hotel, it’s typically a hassle-free investment and a great passive income option.
Student Accommodation
Student accommodation is specific accommodation for students. It’s in constant demand in towns and cities that have universitie, regardless of the location. Therefore, investing in student housing can provide high rental yields and consistent occupancy rates.
This property tends to offer flexibility as there is usually a demand for short, long and seasonal lets. However, student tenants may not look after the property well, causing high wear and tear.
Holiday Homes
Holiday homes are 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. However, they can also experience longer void periods and require more management. The market for holiday homes can also be very competitive, which can impact occupancy rates and income.
HMOs (Houses of Multiple Occupancy)
HMOs involve renting out individual rooms within a property to multiple tenants. This can maximise rental income and reduce the impact of void periods. You must also be aware that they can have much more complex regulations than regular rentals.
Co-Living
Co-living spaces cater to young professionals and offer shared living areas with private bedrooms. These properties can command higher rental rates and appeal to a growing demographic. Co-living involves multiple tenants paying rent therefore, it offers a steady income. However, there may be high tenant turnover.
Off-Market
Off-market properties are not listed publicly and can sometimes be acquired at below-market prices. These opportunities require strong networking and market knowledge but can avoid the competitive bidding that often occurs in the public market.
Off-Plan
Off-plan properties are purchased before they are built. These investments can offer significant capital growth if property values increase during the construction period. This property can offer some development risks, like delays, which can then limit rental income as the property can only host tenants when it’s complete.
Build-to-Rent
Build-to-rent developments are purpose-built rental properties. These investments are designed to cater specifically to renters and often feature amenities that attract long-term tenants.
Assisted Living
Assisted living properties cater to the elderly and provide specialised care facilities. With an ageing population, this type of investment can offer stable and increasing demand. It’s important to note that this property investment can be challenging to manage and the market can be saturated.
What Factors Should I Consider When Buying a Property?
To make sure that you’re making a wise property investment, you must consider 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)
Invest Confidently with Peninsular Property
At Peninsular Property, we boast over 30 years of experience specialising in helping investors find the best property opportunities to strengthen their investment portfolio.
Our team of property market experts provides support and guidance during all stages of your investment, from market research to property management, to ensure you can invest with peace of mind.
Whether you’re new to property investments and are looking for your first rental property, or you’re looking to expand your property investment strategy, we can help. Contact us today to learn more about how we can help you achieve your property investment goals.
Common Property Investment FAQs
Off-plan properties can offer significant returns if property values rise during construction. However, they 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.
Student property can offer 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, so thorough research and planning are 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.
