6 tips for investing in UK rental properties

Investing money in rental properties is one of the most established forms of investing in the UK. Generations of investors have trusted rental real estate to provide solid, long-term passive income. The best investments can grow your wealth, generate stable income for your retirement, and leave you with a fantastic asset to pass on to your loved ones.

But there are some important things you should consider before investing in rental properties. Consider some of the rental investment tips below to make sure you secure an investment that will ensure you success.

1. Do your research

It sounds obvious, but too many investors – especially new investors – rush into a purchase before they do enough research.

First, for a good guide to rental property investing, talk to fellow investors. Maybe you know friends or colleagues who invest in real estate. What do they recommend? What advice do they have for you based on their experience?

Then read the latest news and market information. Staying informed will give you a solid foundation for building your rental property investment plan before you embark on any purchase.

2. Set realistic ROI goals

When deciding how to calculate the return on investment for a rental property, it is important to remember that it should be viewed as an ongoing, long-term strategy. The best property returns take years, not months.

Then think about how you will use your rental income. Is it to pay for other expenses? Build a retirement pot? Or will this rental income be your main source of income?

Balance that with what you can realistically achieve in the rental market. What is a good return on investment on a rental property? It depends on a number of factors, from location to the type of property you are investing in. For example, a modern rental apartment in Manchester city center could reach between 4-7% per annum. A property in London, where house prices are more expensive, is likely to achieve something a little lower than that.

Once you have defined a good rental return on your investment property, you can then make plans to ensure that the investment you make will help you reach that number.

3. Choose your location carefully

There are a number of factors to consider before deciding on the best places to invest in rental property:

  • Which locations have an insufficient supply of rental properties compared to increasing demand levels?
  • What places – and types of properties in those places – are attractive places to people?
  • What locations are convenient for work / transportation / education / recreation centers?
  • Investing in desirable properties, convenient locations, and low supply areas will give you a solid foundation for any rental property investment.

Next, look at the rental prices and local average returns. If the property values ​​are high, you may find that the returns are lower. For example, London has a large rental market, but since properties are more expensive than other parts of the UK, returns tend to be lower.

Using your research sources in the first step, check out where the yield growth is the strongest. Once you have chosen a specific town or city, you can begin to explore the areas and properties in that location that will be the most attractive in the rental market.

4. Decide on management before investing

When you start to evaluate rental property investment, one thing that sometimes gets overlooked is property management.

First, from a time perspective, managing a rental property can require a lot of attention. From marketing the property and tenant supplies, to ongoing repair and maintenance work. Homeownership may soon start to eat into your free time.

Next are the cost implications – and their impact on your overall returns. Managing a property can be expensive, whether it’s advertising costs or buying new materials to fix repairs. If you decide to manage the property yourself, these financial implications will need to be factored into your decision making when setting your ideal return goal.

You may want to consider working with a property management company to resolve this issue on your behalf. They will deduct all management fees from your rental income, also giving you a clearer idea of ​​your overall return.

5. Take time before your next move

It may take you a while to achieve your desired return, and maybe a little longer for your returns to grow even more. Unlike assets like stocks and stocks, property returns take months and years rather than days and weeks.

Don’t make rash decisions to sell too early. Likewise, even if you are successful quickly, don’t rush to expand your portfolio. Take the time to manage a property and navigate the peaks and valleys of the market.

Once you are comfortable with your investment, you can then begin to explore the possibility of expanding your rental property investment portfolio.

It is important to never be complacent when it comes to rental property investment. Times change, attitudes change. What makes your rental property desirable now may not be desirable in a few years.

A good case study is 2020 and the impact of the global pandemic. As more and more people spent time at home locked out, new tenant priorities emerged, for example:

  • Larger living spaces for working from home
  • Fast Wi-Fi connections
  • Access to outdoor space
  • Houses in nearby communities

2020 has brought to light these increasingly obsolete rental units unable to meet these new demands.

By staying up to date with the latest trends, you can react to changes in the market and ensure that your property – or any future investment – is able to deliver more than tenants want.

Contact Select Property Group for further real estate investment advice & discover their latest investment opportunities.

6 tips for investing in UK rental properties

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