How to Make Money With UK Real Estate

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Property investment has always been considered as one of the best options to put your hard-earned money to work, as historically, real estate has been one of the best performing and appreciating asset classes.

Today’s investment trends have also seen more and more property investors choosing to expand their options into overseas markets such as the United Kingdom. Why has homelessness increased?

Consistently ranked as one of the best places in the world for anyone to purchase real property assets, there is always a rising interest from global investors.

So, if you’ve toyed with the idea of investing in bricks and mortar, here are some tips to get you started in UK real estate investment.

How to Get Started With Real Estate Investment in The UK
Advantages And Disadvantages of Investing in The UK Real Estate
Best Place to Invest in Real Estate in The UK
Investing in UK Buy-to-Let Property
How is the Buy-to-Let Property Market Performing in the UK?
What are the Risks of UK Buy-to-Let in 2020?

How to Get Started With Real Estate Investment in The UK

Figure Out What You Can Afford

Unless you’re sitting on a mountain of money, affordability is often the greatest barrier to buying real estate in the UK. For most of us, that means working out what’s affordable with the savings we have now or could potentially amass.

Either way, becoming a real estate investor rarely happens overnight, giving you time to build up reserves. If you’re looking for quick and easy ways to save, check out these budgeting tips.

Whatever your financial situation, the good news is that there are various ways to invest in UK real estate, so lack of funds doesn’t have to be prohibitive.

Choose a Real Estate Investment Strategy

How you invest in real estate may well be influenced by what you can afford. Nevertheless, it’s wise to familiarise yourself with all the different avenues. You might even discover an investment path you weren’t aware of.

In the UK, there are several ways of making a real estate investment. Bear in mind there are pros and cons to all, so research is crucial. For example, options include:

Buy-to-let

Buying property which we then rent out is probably what springs to mind when most of us think about real estate investment in the UK. It’s an expensive but worthy long-term option if you like the idea of being a landlord or want a relatively consistent income stream. Here’s how to get started with buy-to-let.

Real estate development

Buying and developing, building or renovating takes time and money – usually a lot of it. Investing in real estate like is more likely to suit you if you have building skills or trusted contacts at hand who can help you at every step.

Flipping for profit

This is when you buy property and then sell it (hopefully) for a profit. If you time it right, you can make considerable sums of money in a relatively short space of time. Time it wrong, and you could be left holding the keys indefinitely. If you choose to flip, it’s sensible to have a back-up plan such as turning the property into a rental if the market dramatically cools.

Real estate investment funds

This is ideal for hands-off investors who don’t want to get involved on a day-to-day basis. In most cases, your money will be part of a pooled fund and used to invest in property or a portfolio of properties. You’ll have to pay for your money to be managed. Plus, you’re unlikely to be able to specify exactly where your investment will be made.

Property crowdfunding

This is basically pitching in for a property and sharing out the proceeds – whether that’s rent or profit from a sale. Like real estate investment funds, this is another hands-off way to invest in property. However, unlike a fund, you get to choose where and in what your money is invested.

You can crowdfund property with very little upfront cash. In some cases you need as little as £100, making it a good place to start. Examples of crowdfunding platforms include TheHouseCrowd, Property Partner and Yielders.

Understand The Risks

Understanding the risks can help you build contingency plans. For example, if you go down the buy-to-let landlord route, you’re likely to experience the occasional lull in tenancies or the odd nightmare tenant. Similarly, the market might not be right for a property flip. Or, there could be a downturn in the value of your crowdfunded house or real estate fund.

The point is, being prepared and having an exit plan or emergency fund (or both) can help you weather any storms. Knowing the risks can also give you breathing space. This can allow you to make the right long-term decisions for you, instead of knee-jerk reactions that you might end up regretting.

Remember that the UK real estate market is a constantly changing landscape. So, however you choose to invest, it’s vital to do your homework.

Advantages And Disadvantages of Investing in The UK Real Estate

Advantages

1. You could earn rental income while owning an excellent vacation home

More often than not, if you are looking at investing in an overseas residential vacation property you have the option of renting it out as a vacation home. An advantage that you can get from doing so is that on days when no one is renting out your property, you and your family can enjoy a great holiday in the UK in your own home! Property purchased in prime UK real estate markets is an excellent choice of earning a passive income from your investment.

2. Property investment is a stable long-term investment option

Choosing to invest in real estate has been seen as a more stable long term investment option in comparison with shares, stocks and other assets that tend to easily fluctuate in value. Even with the rise and fall of the economy, property investment in the UK has been attractive because global demand has seen a constant increasing trend over the long term.

3. The property investment market is lucrative and in demand

Albeit expensive, the real estate market in the UK has been quite good and stable. You should always be wary about investing your money in a country with problematic economic conditions. The financial status of the whole of the UK has been extremely resilient which makes it an excellent choice for foreign investment.

Disadvantages

1. It will be costly

There is no denying it: if you are looking to invest in property in the United Kingdom, you will need a lot of money! The UK, particularly London, is a very, very, expensive city, with property prices that are always on the rise.

Currently, the demand for good investment homes is greater than the supply, which drives the price of houses for sale even higher. Hence, you will have to have a lot of cash on hand to purchase a property to if you need to create a positive cash-flow with your investment.

2. The taxes are quite high

With the current economic situation in the UK, it is a fact that the price of taxes is quite hefty, especially so for property investment. For example, if you are not from the UK and you already have property in the rest of the world or your own home country, you are charged an additional 3% stamp duty surcharge on your property. This amount is on top of all the other universal tax charges for purchasing property, such as capital gains and real estate tax.

3. Difficulty borrowing money for your mortgage

The Bank of England still sits at a borrowing rate of 0.5% interest, which is still relatively low, however, as a foreigner you may have problems borrowing money to cover the cost of the property that you seek to purchase because banks and other lenders are now becoming quite stringent on the application process.

For example, even for UK residents, if they check your portfolio and can see that you may still have an ongoing mortgage, or that your other rental properties and businesses are not earning as much, your application for a property investment loan can be turned down. Cash inflow is always one of the top and heaviest weights of considerations that banks place on borrowers.

Best Place to Invest in Real Estate in The UK

For investors that want to invest in a relatively robust and stable market, the UK remains a solid choice. As the preferred choice for many overseas buyers in 2019, the excellent growth of regional cores has pushed new developments and infrastructure improvements, putting it firmly at the top of investor wishlists for the new year.

With the spotlight moving from the traditionally popular London market to regional hotspots and emerging cities, where are the best places to invest in UK property in 2020? Here are the top 10 list of the UK’s best cities and towns for property investment.

Best areas for UK Property Capital Gains

City	Average price	Peak-current	Last 12 months	Last 3 months
Liverpool	£124,600	0.80%	+4.60%	+2.60%
Birmingham	£168,300	23.40%	+3.80%	+2.10%
Cambridge	£429,500	53.30%	+0.30%	+2.00%
Glasgow	£126,900	2.90%	+3.30%	+2.00%
Leicester	£182,800	28.90%	+4.80%	+1.80%

Over the last three months, according to the Hometrack report Liverpool, Birmingham and Cambridge have shown the highest growth for any city in the UK. With plenty of regeneration projects heading into 2020 and beyond, both Birmingham and Liverpool appear to be the most obvious choices for a BTL investment.

Comparing these cities to London, which grew at 1.1% over the same three month period, regional cities have shown much more positive growth.

Bracknell

Property Price Growth since 2014: 20.77%
Regeneration Projects in 2020: The Lexicon, Princess Square and the Deck, The Grand Exchange

A prime investment location in the South-East, Bracknell is a key market attracting large-scale regeneration, a broad concentration of global commercial brands and all-time demand from the UK technology sector.

In 2019, Bracknell property is worth an average of around £362,000. Despite price rises of 249% since 1999, it remains much more affordable than its surroundings – London sits at around £729,100 while nearby Guildford sits at £534,993.

For investors and tenants that want direct access to London, Heathrow Airport and other key destinations in the South-East, Bracknell remains a much more accessible market.

One of the main drivers of this demand is the ‘2032 Bracknell Town Centre Vision’. This £770 million regeneration project is completely transforming the Bracknell landscape whilst creating new residential, commercial and retail space. As part of a four-phase plan, it includes the Lexicon shopping centre – a £240 million development that has kickstarted regeneration throughout the town.

Slough

Property Price Growth since 2014: 18.14%
Regeneration Projects in 2020: New Eton House, Future Works, Porter Building, Steel House

As you’d expect from an established commuter town under 20 minutes from London, Slough is largely recognised as an investment hotspot due to the connectivity it can provide.

Combined with an affordable property market and one of the largest trading estates in Europe hosting global brands, Slough is building enviable tenant demand and attracting investment of over £1 billion.

46% of homes in Slough are let to renters from London and with 87,000 jobs contributing to a £9 billion economy, this commuter town is setting the foundations for incredible demand. 48,000 commuters to London each day demonstrates the appetite for affordable living outside of the capital.

Like many towns within the London Commuter Belt, Slough is being revitalised via several regeneration projects. Led by the Slough Urban Renewal (SUR) project, nearly £1 billion has been funnelled into Slough, creating game-changing developments for the retail, commercial, leisure and residential sectors.

Two key examples of Slough’s regeneration so far? The Curve and The Centre – two cultural touchpoints that are both iconic landmarks and directly meeting tenant demands.

Birmingham

2019 Population: 1.2 million
Property Price Growth since 2014: 19.30%

Birmingham continues to be one of, if not the most investment popular location in the UK, topping the list for 2020. Despite predictions that Birmingham would face the brunt of Brexit uncertainty, the city has actually been the top performer in the UK since 2016 and doesn’t look set to stop.

2019 for Birmingham was a year of reinforcing the foundations that were established last year, making huge progress on generational developments while expanding an exciting pipeline.

The ‘second city’ continues to experience incredible demand and it’s expected that as the city’s economy expands, rapid population growth means Birmingham will need nearly 100,000 new households within a decade. With Knight Frank forecasting price rises of 12.5% by 2022, it’s easy to see why Birmingham is showing so much potential as an investment location.

Birmingham rental yields for 2019 have sat anywhere between 4.4% and 5.3% according to PropertyData, with the market largely made-up of 1-bed and 2-bed apartments in the city centre.

Demand is huge for properties near amenities in the city and for investors, there’s clear evidence to show that Birmingham has the potential to deliver exceptional returns on top of growth.

With construction for the Commonwealth Games 2022 Village started in 2019, we are expecting further development to take place in 2020 as preparations are made to host the prestigious event. 2020 will also see the infrastructure implemented to harness 5G technology, as the West Midlands begins testing innovations.

Liverpool

2019 Population: 494,000
Property Price Growth since 2014: 12.45%

While price growth has slowed during 2019 after an outstanding Q4 of 2018, Liverpool remains a top investment destination in the North thanks to exciting developments, exceptional career opportunities and rising tenant demand throughout the region. JLL expects that property prices in central Liverpool’s will rise by 2% and rents by 3.5% throughout 2020, effectively ‘defying the gloom’ affecting other aspects of the UK property market.

Regeneration is having a huge impact on demand for the Liverpool rental market. After the completion of Liverpool ONE, the largest open-air shopping centre in the UK, Liverpool Waters has moved to the forefront. A £5.5 billion redevelopment of Liverpool’s waterfront, the project will create new residential, commercial and cultural spaces ready for residents to enjoy, completely transforming one of the most iconic areas in the city.

According to the council’s ‘Liverpool Local Plan’, nearly £14 billion worth of regeneration projects are either in progress or in the pipeline, with the eventual aim of creating 35,000 new homes and 38,000 new jobs.

According to PropertyData, Liverpool is one of the highest-performing Buy-to-Let hotspots in the UK – the postcodes L7 and L1 are regularly achieving yields of 8.2% and 8%, with rises of 15% and 12% in the last five years respectively.

Manchester

2019 Population: 546,000
Property Price Growth since 2014: 22.09%

Manchester is one of the most exciting places to live and work in the UK, attracting young professionals that want excellent career opportunities alongside families that are looking for affordability.

With a skyline that has been transformed by investment, Manchester seems to be experiencing the same ‘ripple effect’ that affected London in the last decade.

After 2009, London was one of the first markets to recover and saw growth spread out from the centre. It’s expected that the same will happen to Greater Manchester, as the momentum of the city pushes growth out to areas such as Stockport, Bolton and Salford.

It helps that one of the major benefactors of investment is Manchester’s infrastructure. From the Manchester Metrolink to HS2 plans – the Transport for Greater Manchester project is ensuring an efficient, modern transport system around the region.

For Buy-to-Let investment, Manchester seems like one of the ‘safest’ bets in the UK. As a recognisable location with plenty of history, the second-fastest growing city in the country (with 15% growth, just behind Birmingham) is experiencing incredible price rises that are putting it firmly at the top of investor wishlists.

Leicester

2019 Population: 417,000
Property Price Growth since 2014: 23.92%

Another major destination within the Midlands, Leicester is one of the cities suffering from chronic supply and demand issues. This has created an incredibly competitive market and ensured excellent growth over the last 12 months, making Leicester a key player in the Buy-to-Let sector.

Looking at past performance, Leicester’s growth forecast looks positive. With growth of 250% since 2000, 7.7% in the last year (#1 in the Hometrack price index) and 2.4% in the last three months (#3 in the Hometrack price index), it’s continuing to push forward as people leave London for regional markets.

In terms of regeneration, Leicester Waterside is a project that is aiming to transform 150-acres of a largely run-down former industrial site at the heart of the city. The waterside regeneration is aiming to create new homes, new workspaces and bring new investment, with the outcome of creating 200 new homes, 140 jobs and nearly 2,000 m2 of commercial space.

Nottingham

2019 Population: 330,000
Property Price Growth since 2014: 19%

Nottingham, one of the surprisingly lesser thought-of investment areas, is similar to Birmingham in location in that it is a very central location in the UK with direct access to many key destinations.

Nottingham is one of the surprisingly lesser thought-of investment areas, despite the similarities it has with Birmingham. With a very central location in the UK and direct access to many key destinations, Nottingham city centre is also well-known for its array of amenities from the retail offerings of the city-centre and Market Square to the restaurants and bars a little further out in Hockley.

The Nottingham infrastructure is incredibly well-developed and offers opportunities in and around the city centre. The metro system, for example, is extensive and connects many of the different networks around the city.

The market is relatively affordable and sees incredible demand from both professionals and students, providing particularly strong rental yields. Growth is largely maintained around the city-centre, where prices have risen by around 210% since 2000.

Regeneration is also delivering a range of new amenities for Nottingham residents. The redevelopment of intu Broadmarsh and the surrounding area has created a new retail destination for the city, serving the rising demand we’re witnessing.

Sheffield

2019 Population: 725,062
Property Price Growth since 2014: 19.5%

Out of all the cities on this list, Sheffield is the earliest within the property cycle. Prices are still some of the lowest out of all major cities in the UK and despite a dramatic transformation of the city-centre, it’s unlikely there will be huge shifts in prices until 2020.

Sheffield offers the opportunity to secure excellent prices within the current market, essentially ‘locking-in’ stronger yields if forecasted growth occurs. With £480 million spent on regenerating Sheffield’s shopping district (including The Moor Shopping Centre), Sheffield’s local authority are directly looking to target demand with incredible amenities.

This future Buy-to-Let investment hotspot has seen prices grow by 223% over the last 20-years and still remains one of the most affordable markets with the average property costing £199,000. While Sheffield might be still a few years behind some of its Northern counterparts, it has a bright future ahead if the market continues on the same path.

Oxford

2019 Population: 165,000
Property Price Growth since 2014: 11%

A city that is often under-recognised within the property investment industry, Oxford anchors one of the strongest economies in the country – delivering an output of £21.9 billion through the dedication of 434,000 working professionals.

The city ranks 3rd in the UK for property price growth over the last 10-years, with figures peaking at 55% higher than they were a decade ago. Though price growth may have slowed since 2016, Oxford still draws a vast amount of investment interest boosted by exceptional employment opportunities and a world-famous education sector.

Connectivity in the region is vital and Oxford either has (or is planning) direct links with London, Cambridge and Heathrow. Between East-West Rail and Crossrail, Oxford will benefit from the infrastructure improvements sweeping through the London Commuter Belt.

This has helped push Oxford’s employment rate to less than 1%, increasing foreign direct investment (FDI) by 122% when compared to 2018’s figures

London

2019 Population: 9,100,000
Property Price Growth since 2014: 13.61%

After 2009 London saw the fastest growth in the UK, hitting peaks of around 70%, three-times faster than the wider UK. Prices in the capital skyrocketed during a rise that has now reached a tipping point. Since 2016, London has levelled out, driven by affordability issues and a constricted market.

Brexit has played a huge part in the ‘London slowdown’. As one of the major financial destinations in the world, it’s nigh-on impossible for London to experience prolonged declines.

What we can expect is that once uncertainty clears, foreign investment will once again flow into the capital, driving prices back up in more affordable areas. Looking at the wider market, prices have only fallen by around 1.5% in the ‘cheapest’ 11 boroughs while the 11 most expensive boroughs have seen decreases of 7%

Investing in UK Buy-to-Let Property

Buy-to-Let (BTL) property will remain a popular addition to many investment portfolios across the globe. Buy-to-Let property performs best as part of a medium to long-term investment strategy, where rental income has time to grow.

As UK property prices rise and rental yields grow in key areas, so it’s no surprise that savvy investors are continuing to put their money in an asset as secure as brick and mortar.

Buy-to-Let will always remain appealing because of its ability to deliver two income streams – passive rental income and capital growth. Passive income is a key goal for many investors due to the ways it can be adapted.

Whether it’s supplementing a pension pot in later life or contributing to an inheritance fund, passive income is easy-to-understand and opens up a number of opportunities for investors.

Capital appreciation, on the other hand, demonstrates natural market growth and affects the overall value of the property. Many investors that aim to achieve capital appreciation invest in Off-Plan developments as they allow for capital growth and appreciation during build and after completion.

These investors will typically aim to achieve a significant increase in value during the period of construction before enjoying incremental growth following on from completion.

How is the Buy-to-Let Property Market Performing in the UK?

There’s no doubt that it’s an interesting time for property investment. Tax changes and uncertainty surrounding Brexit over recent years have caused a little hesitation amongst some of the landlord community.

However, and many an experienced investor will agree, the market has remained resilient as a relatively stable, strong investment opportunity, with much of it still boiling down to the old adage ‘location, location, location’;

An investment largely succeeds or fails based on its surroundings and there are some incredible locations emerging for 2020.

While the outlook for the wider UK market is positive for investors, some areas are performing better than others – particularly in some of the larger regional cities and towns up and down the country.

Whether it’s down to media coverage, inward investment or large developments, there are key locations such as Birmingham and on the London Commuter Belt that are experiencing incredible growth – making them ideal Buy-to-Let investment destinations.

It’s the tenant demand in these areas that is playing such a huge role in driving higher returns on investment. With rental yields regularly hitting above 4 and 5%, property price growth has followed suit, increasing at unprecedented rates since 2016.

The UK market has already seen an increase in the average price of UK flats, which has risen by £1,250 a month since 2013. These price increases equate to nearly £75,000 over the last five years and look set to continue as apartments grow in popularity – especially in city-centres.

Growth of the UK Rental Sector (PRS)

While traditionally, London was the most popular destination to invest, we’re seeing regional cities such as Birmingham seize the spotlight. The level of demand in these locations is growing at an increased rate, driving property price growth up and down the country.

This is mostly down to the so-called ‘Generation Rent’ – a demographic that is happy to rent indefinitely following trends from mainland Europe and the USA. .

From young adults to older tenants, Generation Rent is helping push the UK’s private rental sector to the forefront. It’s estimated that by 2039 renters will outnumber homeowners in the market, demonstrating just how big an audience a Buy-to-Let investment could cater to.

With the UK’s private rented sector making up a staggering £1.5 trillion of the overall property market, it’s firmly the fastest growing property sector in the country.

Now imagine that you have a quality investment in an up-and-coming market located in the fastest-growing sector in the country? This is why Buy-to-Let remains a popular investment strategy and a key addition to any portfolio.

Rising UK Tenant Demand

With the population expected to swell to around 74 million in the next 20 years, the potential demand for housing is vast. Many of the major ‘first’ cities are falling behind on delivering housing quotas, increasing the impact of the ongoing residential undersupply.

For investors, residential undersupply has the potential to deliver opportunity. With the right investment property in the right location, investors are realising both rental income and capital growth, taking advantage of a competitive market to deliver returns.

One finding from the SevenCapital Brexit Survey demonstrates that nearly 85% of investors are currently investing in the UK market, highlighting just how popular UK property remains both an attractive and stable investment for high-net-worth-individuals.

This also shows that the UK Buy-to-Let sector remains a viable opportunity for an investment. Investors would be wise to consider a Buy-to-Let market that is fueled by growing demand, consistent rental yields and low-interest rates that are creating a ‘perfect storm’.

What are the Risks of UK Buy-to-Let?

Trust in developers and construction contractors

As with any investment, there is always an element of risk that needs to be considered. This is why, with property especially, it’s vital to have trusted partners throughout the process.

Firstly, take the developer in an Off-Plan investment for example. During this process, it’s vital to know the developer working on the project, the standards they maintain and their performance in the past.

Void periods

With any Buy-to-Let investment, there’s always a risk of void periods. One of the pitfalls that can affect any investment, void periods occur when the property is empty and no rental income is being generated.

Void periods can be particularly damaging when they’re multiplied over a portfolio, especially if the investor is using the income to pay off a mortgage. With no returns, investors may have to use their own money to make repayments which can quickly result in a net loss.

The best way to counter this is to ensure that your investment is in a location with consistent tenant demand. If you can provide accommodation near career opportunities or popular amenities, you’ll find it easier to let.

Working with letting agents can help with this, as they typically have a good understanding of the market and local demographics. Seasoned investors will also maintain a ‘rainy-day’ fund that can be accessed in the event of an unexpected void period.

Downturns in the market

Of course, downturns in the market can also negatively affect a Buy-to-Let investment. While investors in a long-term strategy should expect peaks and troughs, UK property has historically shown growth over extended periods provided the investment is in the right location.

Maintaining due diligence on the side of the investor, as well as performing the necessary research, can often mitigate any major growth issues further down the line.

As always, make sure that you speak to a financial advisor in advance and during the process – trusted partners are vital and can be a huge difference between success and failure.

Finally

Ultimately, property shouldn’t be seen as a quick purchase or investment. If you’re looking to buy a home – chances are you wouldn’t be thinking about selling up again in less than five to 10 years.

The same thing applies to property investment. It’s likely that you’ll be looking for long-term gains and while no investment is 100 per cent safe, property should be seen as a marathon not a sprint.

This is especially true for those that want to use property to secure their financial future. The new state pension of £168 per week is simply not enough to live off, this is why we encourage investors to look at retirement planning more broadly, especially in terms of investment.

Buy-to-Let property can be a useful way to save for a happy and worry-free retirement. For those that are looking to the future, investing in property should rightly be the top consideration when planning a portfolio.

As with any investment, ensuring proper due diligence throughout your journey can stop issues further down the line and working with trusted partners can make the whole process much easier so it’s generally a good idea to speak with specialists wherever possible.