Finding the best property to invest in is tricky. Of course, you could simply pick something based on the yearly returns you’ll see… But that’s not the be-all-and-end-all of investing in property. That’s what this post is all about: not just what kind of returns you can expect, but what makes a property truly worth investing in.
Let’s start by looking at the best types of property to invest in, and what sets them apart.
HMOs/Houses in Multiple Occupation
According to official UK government guidance an HMO, or a house in multiple occupation, is a property rented out by at least 3 people who are not from 1 ‘household’ (for example a family) but share facilities like the bathroom and kitchen. These properties are common around cities like London and Manchester, where there are students and young professionals that need relatively cheap housing near centres of employment/education.
HMOs offer the best yield of any property type. According to research conducted by Platinum Property Partners, HMOs offered a 12.4% gross yield on average between 2010 and 2014. That was far more than the 5% average yield from regular buy-to-lets during the same period.
However, there are two problems you’ll encounter if you invest in an HMO. First, you’ll have to get an HMO licence. Not every HMO needs one, and requirements differ between local councils. HMO licence cost varies too, from between £500 to £1000 or more, and licences can be valid for just one year, or up to five.
Besides that, there’s simply more work involved. With more people in the same living space, there’s more of a chance that your property will be damaged and require expensive repairs. This can significantly cut into your return. And since HMOs are often student accommodation, this adds more problems into the mix: late payments are more likely, and students are less reliable tenants, often moving on with little notice. So while a well-managed HMO offers excellent returns, they require more detailed management.
Apartments are a good ‘halfway house’ between HMOs and buy to let houses. While your yield isn’t quite as high, apartments typically attract more stable and securely employed tenants. This is great news for a number of reasons:
- There will be less of a difference between your gross and net yield, since you don’t need a licence, and there’s less chance of missed rent payments
- Your property is less likely to become damaged, since your tenants are more likely to be young professionals and families who want to keep the property in good condition
- There are new build apartments hitting the market up and down the country, many of which offer buy to let investors first access
- Since apartments typically cost less than houses, you won’t be hit with as much capital gains tax if you should choose to cash in on your investment
All that being said, investing in any kind of British land or property has its benefits. The U.K. has a growing population, and the current shortage of new build properties keeps prices inflated. As such, house and land prices will only continue to grow. We offer a mix of apartments, HMOs and houses—we’ve no shortage of buy to let properties for sale.
Where to Invest in Property
Just as important is where you actually choose to invest. The UK housing market as a whole has offered excellent returns for several decades, a trend which is likely to continue into the near and medium term. However, even if the market does dip in certain parts of the country, it’s likely to continue growing at a healthy pace elsewhere. Let’s take a look at the best places in the UK to invest in property!
Buy to Let Investment Manchester
Manchester is England’s second city, and is rapidly growing. Near the city centre and the Media City hub, dozens of new blocks of flats are being built. The majority of these are being marketed for buy to let investors. Why? Because Manchester is seeing upper-single-digit growth figures in property prices. While London and the southeast generally have stagnated somewhat, this has been offset by growth in the north and in Manchester in particular. Not only that, but an influx of people trying to escape London house prices has pushed up prices here significantly.
Not only that, but the satellite towns around the city—which form Greater Manchester—have seen similar levels of growth. Here, the price of terraced and semi-detached houses has grown far faster than in the southeast. Other northern towns like Leeds and Sheffield have seen similar revivals.
View property investment opportunities in Manchester from Aspen Woolf.
Buy to Let Properties Birmingham
Don’t let anybody from Birmingham hear you call Manchester the U.K.’s second city! Birmingham definitely has a claim to the ‘crown’. For starters, it’s the second most populous city in the U.K., with well over a million people, and about 3 million in the surrounding urban area. This kind of demand for property means that prices grow steadily here.
Not only that, but Birmingham’s population is growing steadily. The city is one of the areas of the U.K. that new immigrants feel most comfortable, which is rocket fuel for local house prices! Investing now, as the population continues to grow, is a smart move.
Buy to Let Properties London
The London property market grew at practically exponential rates over the last few decades. While that growth has slowed down, London remains a fantastic place to invest. As easily the largest financial hub in Europe, and a population centre, it’s highly unlikely that the market will fall from the heights it’s attained.
View available property investment opportunities from Aspen Woolf in London.
But no matter where you choose, the U.K. property market is an excellent choice for investment, with an eye to building wealth. At Aspen Woolf, our award-winning independent advice has been trusted for over a decade—much to our clients’ satisfaction. So contact us online, or talk to one of our experts at +44(0) 203 176 0060 today!