UK Property Investment Tips:
- Don’t Listen To BS
- Practice Analysing Deal
- Understand That It’s Not Passive Income
- Don’t Invest Every Last Penny
- Use A Mortgage Broker
- Thoroughly Screen Your Tenant
- Have An Exit Strategy
- Specialise In One Property Investing Strategy
- Have A Contingency Fund
- Don’t Buy Somewhere Just Because Others Are
- Educate Yourself
- Investing in UK property offers high potential returns with low risk due to consistent demand and price growth, with historical data showing prices doubling every decade.
- Our property investment tips include avoiding misconceptions like “property always goes up” and emphasising the importance of analysing deals and locations for investment properties.
- Practical advice for investors includes understanding that property investment isn’t entirely passive, maintaining an emergency fund, using mortgage brokers for better rates and convenience, and thoroughly screening tenants.
Whether you already own a few investment properties or you’re a complete beginner who’s learning the ropes, these property investing tips are bound to increase your chances of becoming a highly successful property investor.
If you’d place yourself in the first category, feel free to skip straight to the 11 property investment tips. For those who are still educating themselves, or are on the fence about UK real estate investment, you may find it useful if we first go over why you should invest in UK property.
Why Invest In UK Property?
We dived into this question in a lot more detail in our ‘Is UK property a good investment In 2024’ guide so I’d recommend giving that a read if you want a comprehensive breakdown. But for the purposes of this article, we’ll just summarise the main reasons why:
- There simply is no other asset class that comes close to UK property in terms of potential returns and the low level of risk involved in a hard asset such as property. For example, in the above-mentioned guide, we looked at an investment property in Liverpool. Taking into account both, rental income and the average annual property price growth in Liverpool – 6.69% (multiplying this by 4 because we’re purchasing with a buy-to-let mortgage), we arrived at an annual return of 33.45% on our invested capital. What other investment vehicle could match that?
- The UK has a chronic undersupply of property and a growing demand in its largest cities. You don’t need a degree in economics to know that low supply and high demand equals prices going up.
- Speaking of prices going up, ever since 1085, property prices have doubled every 10 years. This trend has started to slow down in the last 20 years – between 2003 and 2013, the average UK house price has grown by 34.35% and between 2013 and 2023 it grew by 78.87%.
- Generation rent is quite quickly becoming multi-generation rent as people prioritise living luxurious lifestyles over saving for house purchases. This means that demand for rentals will remain high, and very possibly increase, which will send monthly rents even higher.
Property Investment Tips UK
Without further ado, here are the 10 best property investment tips for UK investors:
1. Don’t Listen To BS
I’m sure we’ve all heard the phrase ‘property only goes up’ – you’ll often hear this from amateur property investors or first-time buyers as the main reason why they’re purchasing a property. Clearly, they must have forgotten about the 2007 housing market crisis (otherwise known as the subprime mortgage crisis) or never bothered to watch the masterpiece that is The Big Short – a movie based on those events (I would highly recommend giving this a watch).
The value of a property can, just like any other asset, go up or down depending on a variety of factors, such as supply and demand for property, economic conditions, and changes in interest rates. Whilst it’s true that the overall trend in the housing market has been a positive one, you can’t expect to buy a property and have it increase in value the following year. It may very well turn out that it drops by 5-10%.
This leads us to the second largest misconception about property investment – all types of properties in all locations will increase in value. People don’t say this one out loud but it’s one they definitely believe if they’re buying properties in random locations and hoping that they will make a boatload. There’s a difference between a house in a city and a house in a tiny village where nobody wants to live – one of those has demand, and the other doesn’t.
2. Practice Analysing Deals
As the old saying goes, practice makes perfect so turn some telly on, open up Rightmove on your laptop and find some deals to analyse.
Not only will this get you accustomed with all the different tools you’ll be using to analyse properties (especially Lendlord) but it’s also quite good fun once you get the hang of things. It’s quite interesting to see how different factors make a certain property a great investment whereas another could be a rubbish one.
If you’re quite sure how to analyse a property investment, check out the following guides:
3. Understand That It’s Not Passive Income
Another common misconception about property investment is that it’s passive income – to a degree, this isn’t wrong but it’s not exactly an accurate way to describe property investment. Even if we utilise a low-effort strategy such as buy-to-let, the upfront effort is still quite large – on a daily basis, you’ll need to be analysing deals, calling up estate agents and arranging viewings, not to mention then attending those viewings and negotiating with the vendor.
Even after you own the property, which is a lot easier said than done because you likely won’t have a lot of your offers accepted, there are still some things that will require your attention on a monthly basis, whether that’s an issue with the property or your tenant ringing you up to ask about something.
Most months should be pretty quiet but don’t expect every month to be like that.
4. Don’t Invest Every Last Penny
This tip ties in with the common misconception that property values only ever go up. There are risks involved in property investing so it’s best to approach it with caution. Be prepared for every possible scenario that may unfold including a property market crash.
If you do plan on becoming a property investor, my recommendation would be that you only invest a certain percentage of your money – how much exactly is up to you but you should have a sizeable emergency fund in place, just in case life decides to take a large dump on you.
Personally, I have an emergency fund of £10,000 and plan on increasing it by one or two thousand every year.
5. Use A Mortgage Broker
There are several reasons why you should use a mortgage broker:
- Expertise – Mortgage brokers who deal with buy-to-let property are experts in their field and are knowledgeable about the various mortgage products and options available. They can help you find a mortgage which best meets your needs as well as provide guidance throughout the application process.
- Access to a wide range of lenders – Mortgage brokers have industry relationships with a variety of lenders from which they may receive preferential rates. They can help you find a lender who offers the best mortgage rates and terms for your situation.
- Convenience – A mortgage broker can help you navigate through the complex process of applying for a mortgage. They also serve as a single point of contact for all of your mortgage-related needs.
- No cost to you – The majority of mortgage brokers are paid a commission by the lender so their services are free to you. This incentivises them to provide you with the best possible service.
The mortgage broker we opt for is Lendlord – they have a wide selection of buy-to-let and residential mortgages with some of the best rates/fee structures currently out there. Another plus in our books is that they offer fast online applications and the ability to track your application online.
6. Thoroughly Screen Your Tenant
There is nothing, and I mean nothing, more stressful in property investing than having a bad tenant – one that doesn’t take care of your property, or worse, doesn’t pay you rent. You could have bought the best property on the best road but none of that matters if your property isn’t cash-flowing. This is why screening your tenants is so important.
Doing the basic checks, such as affordability and checking for any criminal convictions is all well and good but what you really need to do is call up the potential tenant’s old landlord to find out how they treated the property and whether they paid rent on time. This should give you a better idea of whether you want this person/people renting your property.
7. Have An Exit Strategy
Your exit strategy will depend on what your goals are and which property investment strategy you’re utilising. For example, if you’re looking at property as a short-term investment and perhaps looking to flip properties, your exit strategy will likely be to sell at a certain price. On the other hand, if you see property as a long term investment, your exit strategy may be death – as morbid as that sounds.
Either way, it’s important to consider your exit strategy because it gets rid of emotions. You don’t want to let your emotions take control of your investment decisions so having a strategy to stick by will help you stay disciplined.
8. Specialise In One Property Investing Strategy
Ever heard the saying ‘Jack of all trades, master of none’? It definitely holds true, especially if you’re just starting out. Try to focus on just one property investing strategy and master it before you start to venture out into different, and potentially, more ambitious strategies such as commercial conversions.
9. Have A Contingency Fund
A contingency fund is essentially a reserve of money that you set aside for any unexpected expenses or emergencies that may arise as a result of your property investment. It mostly applies to strategies where there’s a renovation involved but is also recommended when renting out a property.
If you’re renovating a property, a contingency fund of 20% is recommended (that’s 20% of your refurbishment cost). If you’re renting a property out, it’s recommended that you take 10% of the rent you’re paid and pop that into a contingency fund.
But why is this so important? Having a contingency fund in place is important for several reasons:
- Protects you from financial setbacks – one thing is for sure, if something can go wrong, it will go wrong. Your refurbishment will take longer than expected and will cost more than expected. When you’re finally renting the property out, the boiler will eventually blow and the splash-back plate in the kitchen will break. A contingency fund allows you to handle these expenses without having to dip into your personal savings or take on debt.
- Peace of mind – knowing that you have a contingency fund in place can give you peace of mind and allow you to feel financially secure.
- Flexibility – A contingency fund allows you to be more flexible if an opportunity arises.
Overall, a contingency fund is an important tool for managing the risks associated with property investing so we highly recommend creating one.
10. Don’t Buy Somewhere Just Because Others Are
Last but not least, DO NOT FOLLOW THE CROWD without doing your own research first. Just because your favourite property YouTuber recommends that you invest in Liverpool, Leeds or even down South in Portsmouth, you shouldn’t blindly follow them. Do your own research and create your own property investing narrative.
For the most part, any major city in the UK that’s seeing an increasing population and investment into it should be a pretty good bet. Check out our guides on how to conduct property research if this isn’t something you’ve done before.
11. Educate Yourself
Before taking the plunge into your first property investment, it’s crucial to equip yourself with the correct knowledge and a sufficient understanding of your chosen strategy. Trust me, investing without a solid foundation is like blindly jumping into a swimming pool without knowing how to swim – it can lead to some serious financial belly-flops.
That’s why educating yourself should be your first step. By dedicating time to learn about the ins and outs of property investing, you’ll be better prepared to navigate the market, make informed decisions, and increase your chances of success.
Now, you might be thinking, “But won’t I have to shell out a fortune for expensive courses?” Well, fear not, my fellow aspiring investor! I have an amazing recommendation for you: Amateur Landlord (yes, this is a shameless plug) – this website provides a treasure trove of free educational content tailored specifically for beginner investors like yourself.
What sets Amateur Landlord apart from paid courses? Well, besides being absolutely free (hooray for budget-friendly options!), it offers real-world insights and practical advice from experienced landlords and investors. You’ll find articles, guides, tips, and even success stories that can inspire and guide you on your property investment journey. Plus, it’s all presented in a friendly and accessible manner, making it easy to grasp even for those just dipping their toes into the world of property investing.
So, my dear beginner investors, remember this golden rule: education is the key to unlocking your property investment potential. Start by immersing yourself in the wealth of knowledge available at Amateur Landlord and pave the way for a successful and rewarding investment journey.
Congratulations, my budding property investors! You’ve reached the end of our best property investing tips. We hope you’ve found these insights valuable and inspiring as you embark on your property investment journey.
Remember, property investing is not a get-rich-quick scheme, but rather a long-term strategy that requires patience, research, and continuous learning. By applying the tips we’ve shared, such as understanding market trends, leveraging financing options, and conducting thorough due diligence, you’ll be setting yourself up for success.
Don’t forget to make use of the incredible resource we mentioned earlier: Amateur Landlord. Our extensive collection of free educational content, written by experienced landlords and investors, will be your trusted companion as you navigate the exciting world of property investing.