Four ways to invest in the UK property market

Investing in property doesn’t always mean buying bricks and mortar. With an informed approach, you can reap the benefits of the property market in various ways. We teamed up with Clifton Private Finance to advise you on your options if you’re keen to invest in the UK property market.

Exploring ways to invest in the property market - illustrative image of Andrew Minto looking at plans

1. Property development

Buying land or buildings (with potential) to develop and then sell on can lead to great returns but, as with any investment, there are pros and cons, and many factors to consider.

Developing property allows you to work for yourself, put your own stamp on a property, and hopefully benefit from all of any profit made. However, there is also the potential to underestimate the extent of work required, run over budget, find the project to be harder work than you anticipated, and of course, there’s a risk that you may not add value.

Before embarking on a project, you need to consider what type of development you’re after, of what scale, and in which location. You’ll need to give thought to how you’ll find the project in the first place and, crucially, how you’ll avoid overpaying to purchase it.

You’ll also need to consider who will project manage and who will carry out the work—will you do it yourself, or pay tradespeople to do it for you? Be realistic about the myriad of potential costs and considerations, many of which you most likely will not know about if you are new to development.

If you know what you’re doing with property development, and get it right, there is great potential to earn a significant amount of money.

Financing options for property development

Unless you’re very experienced and can reliably manage development risks, they can quickly get out of control and cause huge losses. This is why many development lenders insist on only dealing with experienced developers with a track record. If you’re a first-time developer, you’ll typically need a bigger deposit, face higher interest charges, and probably need to provide a Personal Guarantee (on your personal assets).

When it comes to financing property development, we recommend speaking with an experienced development finance broker to explore your options instead of going directly to a lender.

Development lenders take a case-by-case approach. The best finance option will be dictated by whether you want maximum loan size, lowest total cost or the minimum deposit required. Be aware that what you’re offered will depend on your purchase price, purchase costs (e.g., stamp duty), property location, build costs, professional costs, total Gross

Development Value, build term, loan term and the overall risk profile of what you’re looking to do.

2. Purchase a buy-to-let property

Investing in a buy-to-let (BTL) property means buying an existing building and then renting it out. The beauty of buy-to-lets is that you can develop your own, or you can buy a ready-made one and get going fast.

The simplest form of BTL is a single tenancy. This basically means you have a dwelling and you rent it out to one tenancy (e.g., one person, friends, a couple, family etc.) and they live there. It’s simple to run and fairly low cost, but it does not maximise income.

You then have increasingly more complex, time-consuming, and management-requiring options, that also come with increasing incomes. The classic is a House in Multiple Occupation (HMO). This is a shared house where tenants pay for their private rooms and share communal facilities. These usually generate much more income than a single let would from the same number of rooms. Student lets are also a consideration here.

Increasing the complexity, and income, further are yet more advanced letting models like serviced accommodation, holiday lets, Airbnb, housing association accommodation, local authority accommodation, and care and supported living settings. Rental demand in the UK is so great that a wide range of letting types are needed.

One of the great benefits of running a buy-to-let is the dual value it offers: first is rental income, and second is capital appreciation of the asset over time. Buy-to-lets owned and run as companies can also offer tax benefits. Speak with your accountant or financial advisor about how this can work for you.

Financing buy-to-let mortgages

For a buy-to-let mortgage, you typically need a bigger deposit compared to a residential mortgage, so at least 15%. You will also need to factor in costs for any work required and setting up a property (e.g., including fully furnished and fully equipped for HMOs or holiday lets). Rental income is crucial, so this will be closely assessed by lenders before they are comfortable about what the rental income is realistically going to be.

3. Invest with an established property developer

Investing with an established, trusted property developer is a lower risk, rewarding and tangible way to reap the benefits of the UK property market. This route starts to leverage the resources and expertise of established companies to earn returns on your money with little or no direct involvement needed from you. It’s also a chance to be part of some great companies and contribute to adding much-needed homes in the UK.

Investing with an established developer usually means a loan from you to them or can sometimes mean a closer partnership where you and the developer share more risk and reward. It’s the investor’s choice and different companies offer different options.

The types of developer, types of project and terms on offer are extensive, and can be overwhelming. Our advice is to start with firms that you know, like and trust. Consider their ethos and values, and whether they resonate with you. Meet their people, check out their backgrounds and previous projects, and speak with their clients.

This method of investing is hands-off and often suits people who may have funds to invest but don’t have the time or expertise to run an investment project. However, there is still a close link to what’s happening, the project and the people involved. Some developers offer Investors the opportunity to visit during the build, or for a launch party at the end.

Investing with Landhaven starts from £25,000 with no upper limit. Our focus is on a collaborative partnership—whether it’s your first investment or you’re a seasoned professional, we’ll guide you through everything you need to know.

4. Invest through property crowdfunding

Property crowdfunding allows development companies and lenders to raise money for projects from a large number of people. The risk to each person is reduced because it’s spread across a crowd of people and/or multiple projects. Investors earn a return from property by contributing a fraction of the total amount of the investment. The capital raised is used to buy or invest in a property or a property-backed loan.

There are a broad range of crowdfunding platforms that allow retail investors to participate in development projects run or managed by others. Each has a slightly different offering, models, and rules. We’ve listed some examples worth checking out:

Some of these platforms also have tax-efficient offerings that use the benefits of ISA (Individual Savings Account) rules.

This method of investing is very hands-off. It suits people who have funds to invest but don’t have the time or expertise to run a project. With this approach, investors are removed from the project and people involved, so there is usually little or no personal interaction.

Whichever property investment route you choose, before leaping in there are key questions to ask: how hands-on do you want to be with your investing? Do you fancy managing contractors on site daily or going DIY on refurbishing an old building? Or would you prefer to sit back and let someone else take the strain? Perhaps you’re super-busy or new to building but keen to put your money to work while getting regular updates and interest growth.

And finally, how much time, knowledge and money do you realistically have available for property investment, and what will the real returns be once all costs are accounted for? An honest assessment here will help you to make good decisions about how and where to invest in property.

At Landhaven, our projects are based on strong design principles, quality craftsmanship, and unwavering respect for the environment and the local community. If you’re looking for collaborative property development opportunities that maximise potential and work well for all involved.
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