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How much money do you need to invest in property in the UK?

by Nikki Dale -

UK property investment has evolved over the last 10-years, with many alternative opportunities opening up for retail and seasoned investors that didn’t exist before.  This was partly due to the financial crash (2008), as when banks turned off the funding-tap to developers, they became resourceful on finding the money via other means and individuals.

Also, buy to let and specialist mortgage products have taken on more favourable forms over the last few years, with buy to let mortgage rates becoming far more competitive, therefore making investments more viable.

Firstly, why should you invest in UK property?

For landlords and investors alike, they are attracted to the formula, opportunity or even ‘guarantee’ to make money from investing in UK real estate, whether that is, monthly rental return, fixed annual interest, annual property growth or a combination.

With multiple asset classes and alternative investments to choose from, ranging from low to high maintenance, majority offer a lucrative ROI.  With tangible asset ownership, that real estate provides, the risk also becomes rather minimal when comparing it to non-asset ownership investment products or stocks and shares.

It also means there is often an option to spread your cash further, or not put 100% of your own money into the investment and purchase with the aid of a buy to let mortgage.

Notwithstanding the attraction of a regular rental return, property in the UK, in established or up and coming regeneration areas, will likely be sold for more money than purchased.

Read more: How the booming housing market is impacting house prices, buyers and sellers

If your desire is to be an investor, rather than a hands-on landlord, you can hire a management company to look after and let your property on your behalf.

What are the ways you can invest in property in the UK?

To know how much you need to invest in property in the UK, it’s important to research your options, as there are several different ways you can invest into real estate.

Depending on what type of property investment is right for you, will determine how much capital you’re required to put in.  And what’s refreshing to know there are property investment vehicles that start from as little as £5,000, with some products at an even lower entry level.

That said, this type of low entry investment is not individual asset ownership.  The nature of it, is more collaborating with others to own collectively or to loan to a property company or developer, which suits many people that prefer testing the market, or do not have enough capital to buy a property outright.

Here is a list of the leading property investments, UK wide, that you could consider:

Read more: What are the ways you can invest in property in the UK?

How different towns and cities can impact on the price of your investment.  

Property prices can vary quite significantly across different cities in the UK.  Looking country wide, the North tends to be far cheaper than the South, with London having a particularly high entry point.

This naturally impacts annual rental return.  In southern cities you may see a typical 3%-4% net yield, whereas in northern cities, taking Liverpool as an example of a very popular location to invest, 6%-7% net yield is very realistic.

Three popular property options and how much money you need to invest?  

Residential Buy to let

Residential buy to let is one of the most popular property investment strategies.  In the right town or city, investors can benefit from high monthly rental income and annual growth, plus having the property fully-managed is always a great hands-off, armchair investment option.

There are some additional fees and costs to consider, like stamp duty and residential buy to let is often mortgageable, which monthly cost needs to be weighed up against the projected rental income.

As mentioned, prices vary depending on whether you’re buying North, East, South or West of the UK.  Typically a low entry price in Liverpool and Sheffield is around £90,000 – £110,000. Manchester holds an average of around £200,000, but some projects offer one-beds for as low as £135,000 – £150,000.  In comparison, in the South East county of Kent, one-beds are circa £225,000 asking price, in a high end new build development.

Purpose-built Student Accommodation

With student property you are still buying a tangible asset, that’s registered at land registry, the only difference is your property must be rented by students-tenants only.   Student property is typically an en-suite, studio or one-bed apartment at a fixed price purchased direct from the developer off-plan or as a completed resale from an investor.  In the North where majority of opportunities come up, the developer offers an assured annual net return of between 7%-10% for the first one, three or five years as standard.  And while these properties do not fall under conventional buy to let mortgage criteria, making them cash-only, they’re likely exempt of Stamp Duty.

Prices vary depending on whether you’re buying in a first, second or third tier city, but typically you are looking at entry price of £69,999 for a self-contained studio in popular Stoke-on-Trent, and a similar start price in Liverpool.  In comparison, Cardiff for example is starting at plus £80,000.

Loan Note Investment  

Property Loan Notes are becoming increasingly popular with seasoned investors as an alternative to owning bricks and mortar or as an additional investment to diversify their portfolios.  Many are attracted to a high ROI, with a fixed short-term exit strategy of typically two-years.  The common entry level of these investments is conveniently low at only £5,000.

Loan Notes are IOU’s from a company to an investor.  You are making a loan to the company and the company is agreeing to pay it back with a fixed amount of interest. Interest is from 8% P.A. typically, but some established companies offer 10% or 12% P.A.

What are the extra costs when investing in a UK buy to let property?

When buying a property, particularly a property that you’ll let out for monthly rental income, it will bring with it a number of additional costs.  As mentioned, some will apply to some property purchases, while others won’t apply at all.  So, it’s dependent on the type of investment you go for.

Real estate is a hugely popular investment choice, however there are still many factors to consider before investing.   Gaining knowledge on the different ways to invest is fundamental, especially if you are at the start of your investment journey.

Useful article: How to calculate property yields properly


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