Types of Property Investment: Renting

If you have interest in investing in real estate a base knowledge of the diferent types of investment is crucial, especially if you're not sure which type of investment strategy to pursue. Lets explore the different types of properties available for investment and the various methods for renting them out. It is essentual to know the most popular investment strategies as well as the expected return for your investment.

In my opinion and experience if investors are looking in getting those returns their childer and grandchildren will have an abundant life and that is what we are trying to help our Bespoke Investors achieve. The term Generation Wealth is often associated with the property investing but we are going to achieve high cash flow and Generation Wealth. Keep reading our article to better your knowledge.

Types of Residential Properties in the UK

Before we dive into the different investment strategies available, it's essential to understand the different types of residential properties in the UK. There are various types of residential properties, including:

• Houses: Detached, semi-detached, terraced, and end-terrace houses

• Flats: Studio flats, one-bedroom flats, and multi-bedroom flats

• Maisonettes: A two-story flat

• Bungalows: Single-story houses

• Cottages: Small, typically old-fashioned houses

Each of these types of properties has its advantages and disadvantages when it comes to investing. For example, flats can be cheaper to buy, but they often have higher service charges and may be harder to sell later. Houses, on the other hand, tend to be more expensive but offer more space and typically hold their value better. There will be expenses associated with any type of property.

How to Rent Out Residential Properties

Once you have purchased a residential property, you'll need to decide how to rent it out. There are several ways to do this, including:

• Renting the property out to a single tenant (buy to let)

• Renting the property out to multiple tenants (HMOs)

• Renting the property out as a short-term holiday let (service accommodation)

• Renting the property out a Company on a Company Let or Management Agreement (rent to rent)

Each of these methods has its pros and cons. For example, renting a property out to a single tenant is relatively simple, but if the tenant stops paying rent, you'll be left without income. Renting a property out as an HMO can be more profitable, but there are also stricter regulations to comply with.

HMOs

HMO stands for House in Multiple Occupation. This type of investment strategy involves renting out a property to multiple tenants by the room who have their own individual tenancy agreements. HMOs can be more profitable than other types of rentals, but they also come with additional responsibilities and regulations.

The regulations difference from council to council and needs to be check for every property. For example, you'll need to comply with fire safety regulations, provide appropriate facilities, and ensure that the property is well-maintained. Additionally Article 4 Conservation area have been introduced into UK that restrict changed to property usage and structure.

Service Accommodation

Service accommodation is another type of rental strategy that involves renting out a property on a short-term basis, typically for holidays or business trips. This can be a lucrative way to rent out a property, as you can charge higher nightly rates. However, it also requires a lot of work, as you'll need to manage bookings, clean the property between guests, and deal with any issues that arise.

Rent to Rent

Rent to rent is a strategy that involves renting a property from a landlord to a Company on a Company Let or a Management Agreement. The Company manages and maintains the property to a high standard and let it to tenants usualy on a short term stay at a higher rent. The idea of the Company Let is to utilise a property potetial and provide a peace of mind for the landlord creating a win-win scenario for both parties.

This can be a profitable way to generate income, but it requires higher degree of Due Diligence. This crucial part is of great importance that is overlooked and causes a high mistrust from landlords to anyone trying to start with a Rent to Rent. Appropriate permissions are a must from the landlord, lender or land owner applicable for appartment blocks.

Buy to Let

Buy to let is perhaps the most popular investment strategy for residential properties in the UK. This involves purchasing a property with the intention of renting it out as a long-term rental. The rental income generated from the property should cover the mortgage payments, and any other expenses, such as maintenance and repairs. Over time, the property should appreciate in value, providing a return on investment when sold.

ROI for Different Investment Strategies

The return on investment (ROI) for different investment strategies can vary widely. As a rough guide, the ROI for the different investment strategies is as follows:

• HMOs: 8-15%

• Service Accommodation: 10-25%

• Rent to Rent: 20-40%

• Buy to Let: 5-8%

It's important to remember that these figures are only rough estimates and that actual returns will depend on a range of factors, including the actual rent, mortgage terms and interest, expenses, location of the property, the condition of the property, and the market conditions.

Conclusion

Investing in properties in the UK can be a profitable way to generate income, but it's important to choose the right investment strategy for your circumstances. By understanding the different types of properties and the various ways to rent them out, you'll be better equipped to make informed investment decisions. Remember to do your research, crunch the numbers, and seek professional advice if necessary.

If you would like to join our Bespoke Investors please refer to our Bespoke Sourcing page and you will receive a 30 minutes FREE Investment Strategy Call.

FAQs

1. What is an HMO? An HMO is a House in Multiple Occupation, which involves renting a property to multiple tenants who have their own individual tenancy agreements.

2. What is service accommodation? Service accommodation involves renting out a property on a short-term basis, typically for holidays or business trips.

3. What is rent to rent? Rent to rent is a strategy that involves renting a property from a landlord to a company on a Company Let that manages and maintains the property, essentually creating passive investment for the landlord.