A guide to investing in property in 2024

Investing in property doesn’t always mean buying a house, building, or land outright. There are various ways to invest, both directly and indirectly, and each method comes with its own advantages and risks. If you're eager to explore property investment, either as a sole venture or part of a broader portfolio, it’s crucial to research thoroughly, assess your finances, and take measured steps. Follow this guide to better understand your options and increase your chances of success.

Consider your best property investment options

Property investment can take many forms. You could choose to buy a residential or commercial property or put your money into a property investment fund. Consider your circumstances and preferences as you weigh your options.

Below are some of the main routes available:

• Buy-to-let

• Property development

• Buying a new build to sell on

• Investing in property abroad

• Real estate investment trusts (REITs) and property funds

Each option carries its own risks and potential rewards, so never invest more than you can afford to lose. It’s also wise to pay off non-mortgage debts and have an emergency fund covering at least three months’ expenses before making any property investment decisions.

What property investment types are suitable for you?

Direct Property Investment	Indirect Property Investment
Buy-to-let	Real estate investment trusts (REITs)
Property development	Property unit trusts
Buying a new build to sell on	Property open-ended investment companies (OEICs)
Investing in property abroad	Property investment trusts
	Property bonds and loan notes
	Shares in listed property companies
	Property ISAs
	Peer-to-peer lending

Direct Property Investments

1. Buy-to-let

Investing in a residential property and letting it out to tenants can be a popular way to generate income. If this is of interest, be sure to explore the ins and outs of buy-to-let, including the costs and legal obligations.

2. Property development

For those with a flair for renovation, purchasing a property to refurbish and sell can be a lucrative option. However, property development carries its own set of risks. You'll need to understand the pros and cons before diving in.

3. Buying new builds to sell on

Purchasing a new-build property off-plan, before construction is complete, can sometimes yield a profit if property values rise by the time of completion. You might also add value by decorating or making small improvements. That said, there are risks, including potential issues with developers or the local property market.

4. Investing in property abroad

If the UK market doesn't appeal, purchasing property abroad may offer alternative investment opportunities. You could generate income by renting it to holidaymakers and benefit from property value appreciation. That said, it’s important to understand the local market and laws before committing.

Indirect Property Investments

If you’re hesitant to invest directly in physical property, there are a variety of indirect options that allow you to gain exposure to the property market without the need to buy and manage a property:

• Real estate investment trusts (REITs)

  These are companies that own and manage income-generating properties. You can invest in REITs by purchasing shares that are traded on the stock market.

• Property unit trusts and OEICs

  These pooled funds invest in commercial and residential property, allowing investors to participate in the property market with smaller amounts of capital.

• Property investment trusts and bonds

  These trusts or bonds allow you to invest in property indirectly while potentially benefiting from dividend payments or bond yields.

• Peer-to-peer lending

  You can also lend money directly to property developers or landlords via peer-to-peer platforms, earning interest over time.

Property investment costs - always be mindful

If you decide to invest by purchasing property, remember to account for several key expenses:

• Solicitor fees

• Estate agency fees

• Land Registry fees

• Surveys

• Mortgage fees

• Stamp duty or regional transaction taxes (depending on location in the UK)

• Insurance

These costs can add up, so factor them into your overall financial plan when determining whether property investment is right for you.

Always consider the risks

Property investment is not without its risks. The housing market is unpredictable, and property prices can fluctuate. Demand for rental properties may also shift over time, impacting your potential returns. Additionally, market-wide crises or specific issues—such as the cladding problem that has affected many properties—could lead to a loss in value.

Property investment should be seen as a long-term venture, and it’s wise to diversify your portfolio to spread the risk. Research thoroughly and consider seeking independent financial advice before making any decisions.

Work out your budget for investing in property

Before making any moves, ensure that you have the financial flexibility to invest in property. Start by calculating your monthly income and expenses to understand how much you can spare for investment purposes. Also, assess any available savings, ISAs, or other investment vehicles you might tap into.

If you’re planning to take out a mortgage, remember that a larger deposit will often secure better loan terms. Use online mortgage comparison tools to explore what deals might be available to you based on your deposit and other financial factors.

Research potential properties

If you decide to proceed with buying a property, finding the right one is critical. Think about your target tenants—whether they are students, professionals, or families—and choose properties in areas that are likely to appeal to them. Properties near good schools, transport links, or major employers can be particularly desirable.

You can search property websites or consult local estate agents for insight into the best investment opportunities. Once you’ve found a property, view it multiple times and assess any issues that might require repairs or renovations. You can use these potential costs to negotiate a better purchase price.

Make your investment work for you

Once you’ve purchased a property, whether you choose to rent it out or sell it, consider how best to make your investment profitable. Look for ways to reduce costs, such as shopping around for affordable insurance or remortgaging to secure better loan terms. Don’t forget to account for ongoing expenses, like maintenance, repairs, and property management fees, when calculating your returns.

In 2023, the UK housing market showed unexpected resilience despite economic challenges. Initially, Savills had predicted a 10% drop in house prices for the year, but as of mid-2023, prices had only fallen by 1.4%. This was a significant departure from earlier forecasts, with prices remaining 4.1% lower than their peak in August 2022. Market activity was also stronger than expected, although transaction levels were down 13% compared to pre-pandemic averages.

Meanwhile, the rental market saw significant growth, with average UK rents rising by 10.4% in the year to May 2023. This growth in rents contributed to stronger demand in the property market, as many buyers sought to avoid high rental costs.

Knight Frank similarly noted that rental price growth, especially in key urban areas, continued at a robust pace through 2023. This made the buy-to-let sector a particularly attractive investment option as returns from rental yields remained solid despite the broader economic pressures.

These figures reflect the ongoing opportunities in both direct and indirect property investments, and seeking expert advice can help you navigate these market dynamics. If you’re looking to explore these options, Your Street is well-equipped to offer personalised guidance, helping you assess which property investment strategy aligns with your financial goals. Don’t hesitate to reach out for tailored advice.

Conclusion

If you’d like more tailored advice on property investment, Your Street is here to help. We understand that every investor's goals and circumstances are unique, and we can guide you through the options that align with your financial situation, risk tolerance, and long-term vision. Whether you're looking for direct investments like buy-to-let or exploring indirect avenues like REITs, we're here to provide expert insights to help you make informed decisions. Reach out to us today, and take the next step toward building a successful property investment portfolio with confidence.