House prices have gone high in the UK with the pandemic and the stamp duty holiday led to a volatile housing market.
According to House Price Index, the fluctuations in house price depends on the sale of houses than the actual prices. The price of properties in the UK rose 13.6% year-on-year in August 2022.
However, as per recent statistics, mortgage rates are on the rising. It could crash the property market. With increasing home and mortgage prices, it is becoming increasingly more challenging for first-time home buyers to set a firm foot.
In this case, how to invest profitably in property in the UK?
What is going on in the property market?
With high-interest rates, homebuyers face incredibly high costs in mortgage repayments. The property market could fall drastically due to the high cost of living and limited income.
As per the Bank of England, the mortgage rates may rise for the 6th time consecutively. It provokes most mortgage providers to withdraw discounted mortgage rates. It further increased the mortgage rates.
All this is leading to grim demand for property purchases. If the phase continues, it could lead to a drastic drop in house price. Per the predictions, property prices could fall between 10% and 15%.
The Bank of England base rate rising to an all-time high of 5% in the second half of 2023 could push the mortgage rates too. It is far more than what it was in 2021. It can affect the demand for the property again.
Why invest in the UK property market?
Investing in real estate is a long-term but high-returns game. When you wish to capitalize on it, you can earn by renting the place or selling it for the best market price.
You can utilize 12-month loans for bad credit from a direct lender to renovate, refurnish, and sell it for reasonable market rates. These loans ensure comfort by helping you spread the cost of the loan in comfortable repayments throughout the year. This way, you can start renovation without waiting to accumulate enough capital. And as the term says, you can borrow it for an inappreciative credit score.
Another reason is you may ensure the quality of life with the best investment throughout your life.
The UK is considered an attractive property market. The demand for property purchase remains high in the odds as well. To an Englishman, owning a property is akin to owning a castle.
5 tips to ensure the best property investment for returns
Investing in a property does not necessarily mean commercial properties only. There are many ways to invest profitably in property in the UK. If it is much more prominent on your list now, assess your finances and decide right.
1) Research property Options to invest in
Every individual has unique property investment goals. You may decide to invest in either a commercial space or a residential one. Before purchasing any property, explore your options, given your financial circumstances, lifestyle, and goals. Here are some popular property types of investing:
a) Buy-to-let property investment
A buy-to-let property is ideal for a landlord who wants to purchase a property for renting purposes. In this way, you will undoubtedly earn more on investment. A good number of people are looking for affordable rentals in the country. Given the situation, the investment could prove profitable.
b) Property development
It implies investing in an old property to modernize it and selling the whole property at an acceptable price. The rate is more than the actual rate one buys it for.
c) Buying a newly constructed property
In opposition to property development, individuals can invest in newly built property. You can sell it by re-decorating it per the buyer’s requirement or ongoing trends. Generally, this property type ensures maximum returns.
d) A property investment trust
A property trust is a way of pooling investment with the propensity of converting the leverage. You may choose either to invest in property or construction companies instead.
If you are looking forward to a more intensive project, consider refurbishing it from scratch. You can add new features to the property’s total value.
2) Diversify your property investment portfolio
Keeping eggs in a basket would not help you reach your investment goals. New investors often mistake investing in a single property type. The property market in the UK is subdivided into parts. Each one functions differently as per the economic ups and downs.
Investing in a single property type is riskier than diversifying the investment portfolio. Identify the location, geographical facilities, current property price, possessions, future value, etc., before investing in any property type.
3) Invests in HMOs for maximum ROI
HMO or Housing with multiple occupants breaks into different living areas, where each tenant pays for renting a room and sharing the facilities provided with other tenants. It provides the highest return on investment and is the best way to diversify your wealth.
If you charge £1000 a person with 200 vacant rooms, you could earn £200,000 a month just by renting. However, you have to ensure proper maintenance of the facility and repair additional wear and tear, plumbing issues, electricity, etc.
The better part is these expenses are just part expenses of the revenue that you earn. In this situation, you can optimize the cost by using specific strategies like installing solar panels for optimized electricity costs, LEDs in rooms, increasing the deposit amount, etc.
4) Check out Holiday homes
Holiday lettings are one of the potential property investments in the UK. Individuals in the country often search for the best destinations to plan their stay.
The trick here is to make money by keeping the occupancy rate high.
Holiday goers often exercise flexibility in choosing their stay and are eager to pay more for a fabulous location with good facilities. Keeping the sales high and phenomenal in the offseason requires an extra walk. Here is what you can do:
- Make your off-season pricing appealing to low-budget individuals/customers
- Host exclusive deals and packages for the most demanding locations
- Go for exciting and hefty paying renovations
- Get crisp images of the lettings with the supported amenities like a gym and swimming pool
- Update the availability as per the possessions and place vacant renting homes to book
- Ensure a memorable check-in experience with attention to detail. Please stay in contact with the customers to ensure their comfort and needs
5) Check out the best mortgage deals Available
Before investing in property, analyze the capital you have. For this, calculate your income and expenditure. This way, you will get disposable income. Apart from this, check out earnings from other sources like- passive income, dividends, retirement funds, etc.
How much interest or returns do they pay? Before using the money, analyze whether it is sufficient to invest in a property or if you would like to wait for a little more.
If you have a surplus, you could check out mortgage rates. Bear in mind that you would have to use some cash to pay for repayments. You can get the cheapest mortgage deals if you can ensure a deposit of 40% or more.
These are some ideal ways to invest profitably in property in the UK. It is worth shopping for the best insurance policies. Try to keep the costs low associated with any product for maximum benefit. You can refinance your existing mortgage after the existing mortgage ends. It would help reduce overall interest costs.