Property investment is a tricky game, but a lucrative one if you manage to play your cards right. You may know that already, but here’s something that bears repeating — the UK property market is charting unsure waters at present. There are concerns about the implications of Brexit, Section 24, and over-cautious property surveyors in the property investment scene. But the good news is, investment opportunities still exist. And, the UK market is quite ready for some exciting strategies that may work out for you too.
The best thing you could do is to sharpen your learning curve. Get to know about some of the best approaches that will draw in the desired income from your property investments this year. So let’s talk about the top five strategies you should give a thought to (if you haven’t already).
This strategy has given many investors the ‘millionaire’ tag. This is the most profitable way to maximise your savings and build a passive income option. Agreed that the recent years have seen some pitfalls in the form of tax policies and price rises. But the buy-to-let strategy is a long-term investment that will surely provide returns if wisely carried out. Therefore, before investing:
• Pay attention to the location to ensure rental demand
• Research property values near to your interest areas
• Try to seal a deal below market value
• Calculate for positive rental yields after all costs are deducted
• And most importantly, take the help of experts—solicitors, property advisers, mortgage brokers, etc.
The ‘Housing of Multiple Occupation’ or HMO is a basic arrangement for room-by-room sharing among different and unrelated individuals. This type of living arrangement is mostly popular among the youth who are moving out on their own and international students. HMOs are a great option if you’re keen on investing in a property for the purpose of renting it out. An HMO generates more rental yield than letting a unit out in whole. But here’s the best reason why it works so well. The demand for shared rentals among students and young professionals will always be there, no matter what's the economic condition. Now, managing HMOs does require a more involved approach. But the yields are so markedly higher due to their rising popularity that they will even support outsourcing the management. Besides, if Brexit does bring on a recession as some people believe, HMOs will see a surge in demand.
3. Serviced Accommodation
Renting out to business travellers for a short and previously-determined duration of time is seeing a lot of takers these days. And, in urban and commercial areas across the UK, this is a lucrative option for property investors, which stands to provide a high cash flow. Different industries have different profit seasons, which mean business travellers from across industries can ensure a steady and high-level of occupancy. Also, this strategy ensures better tax treatment when compared to single let outs. Besides, short-stay tenants also translate to zero eviction hassles.
4. Purchase Lease Options (PLOs)
Purchase Lease Options can be called the ‘dark horse’ of property investment strategies in 2019. While many investors don’t really know how to get the most out of PLOs, some are reaping great benefits through this strategy. Of course, you should consider this option only if you’re willing to take on the responsibilities of property management. So here’s what a PLO basically means. For an agreed price and period, you take complete control of someone else’s property that you can purchase within that period although, there are no obligations. Thus, while the landlord retires from managing the properties in exchange for a fixed income and maximise their personal capital gains tax, you, on the other hand, pocket the difference as assured profit. Now, PLOs can be pretty versatile in terms of whether you want them to be single let units, HMOs, or serviced accommodations. Pro Tip: Make sure your solicitor understands PLOs and sets up waterproof paperwork.
5. Buy, Renovate & Flip
Buying to sell after adding value to the property with renovation and related additions is a strategy that will generate a bigger sum within a short time span. In the right market conditions, this can be a great strategy to buy a property, refurbish it, and then sell for profit. The key factors to consider:
• Buy for the right price,
• Identify locations with the possibility of demand surges and imminent trickling supplies
• Keep refurbishing costs within budget
These are all co-related and as such profits will depend on proper alignment of these three factors. The main advantage of the ‘flipping’ strategy is that it does not require the long-term consideration of the property market, because within a matter of months, profits can be generated. There are no tenancy and maintenance hassles, and it is essentially a one trip journey whose success can bring about several similar deals.
What to remember
The five strategies we discussed are some of the best bets in property investment for 2019, given the current market conditions and investor speculations. Though, I’m not telling you that these strategies are the best bets for you. Ultimately, property investment strategies are relative. So what might work for you and your property may be a poor choice for someone else. Which strategy you’d want to go with also depends on your risk appetite. For example, you can either pick a safe ‘buy to let’ strategy or go for the slightly risky ‘serviced accommodation’ option. So there’s no right way of doing property investments. It all boils down to whether your approach matches your particular needs, goals, aspirations, priorities, commitments, and so on.