All Posts by James Cox

making money from property

5 Ways for making money from property in the UK

Profitable property investment strategies for all investors

Making money from property is one of the most satisfying ways of investing. And there are many strategies that you could use to do so. In this article, we describe five of the most popular.

1.    Long-term buy-to-let property investment

When you purchase buy-to-let property, you are investing for the long-term potential in a growing private rented sector in the UK. By investing wisely and getting good tenants, you should profit from inflation-proofed rental income and long-term capital gains from rising property prices.

You can take advantage of the benefits of leveraging in property investment, which massively improves the returns on your invested capital.

You can pass on many of the duties and responsibilities of being a landlord by hiring an experienced and competent investment property manager. With effortless property management, you should benefit from perfect passive income.

2.    Short-term flipping

Investors who want to profit from capital gain, without holding property for the long term, can do so by using a strategy commonly called ‘flipping’. Two ways you might flip property are:

  • Buying a property that needs refurbishing, doing the work, and selling for a profit
  • Buying off-plan property and selling before the property is complete (or shortly after completion)

If you choose the first method, making money from property this way takes discipline, a tight control of costs, and a systematic approach. You’ll need to consider that a short-term fall in property values could damage your forecast returns.

With the second method, you are somewhat protected against the potential for short-term price volatility – thanks to the discount when you invest in off-plan property. By the time you come to sell, this discount will act as a buffer against a fall in the market. If the market price has increased, this will be translated into a larger profit.

3.    High-yielding holiday lets

Investing in holiday let property is similar to investing in buy-to-let property, except that making money from property this way relies on a steady stream of short-term vacationers rather than the more stable income from longer tenancies.

There are some tax advantages over buy-to-let investment. For example, you can offset all your mortgage interest payments against your letting income, and the cost of furnishings can be deducted from your income before tax is calculated. Also, because this type of investment is classed as a business, profits become ‘relevant earnings’ for pension purposes – meaning you can increase your pension contributions.

Holiday lets pay higher yields, but you will need to market your property effectively to take full advantage. (Read our article “Is holiday let property a good investment?” for more information.)

4.    Fixed-term hotel room investments

For cash investors with a fixed timeline for their investment, and who want a guaranteed return, investing in hotel rooms may appeal. You gain exposure to a high-yielding property investment, without having to buy (and run) an entire hotel! In brief, this type of investment works as follows:

  1. Do your research and select a popular destination.
  2. Select a hotel that offers the benefit of location and good management.
  3. Buy the hotel room.
  4. Receive income from your investment (usually around 8%).
  5. Your capital is returned at the end of the fixed-term of your investment.

This could be a great way for making money from property if you have a cash pot that you don’t need now but will need in, say, five or seven years (for example, to pay school fees for your children).

5.    Diversify with developer loan notes

Have you ever wished you could make the profits that banks make when they loan money to others? Developer loan notes allow you to do just that. In effect, you lend a developer money over a fixed term to help them fund their project. In return you get:

  • A fixed (and high) rate of interest
  • A guarantee on your capital invested
  • The flexibility to take your capital back early

The amount needed to invest is smaller than for most other property investments, and you can build a portfolio of loan notes paying interest and maturing at different dates – allowing some exceptional budget planning.

Summing up

There are many ways for making money from property. The five described here are among the most common. Which is best for you depends upon your personal circumstances, investment objectives and other factors. For a confidential, no-obligation discussion of your options, contact one of the team at Gladfish today.

Cheers,

James Cox

Property Investment UK

Why property investment in the UK is so attractive

Where else could you achieve these huge benefits?

Property investment in the UK is still attractive, despite the headwinds of higher stamp duties on investment properties, a tougher borrowing environment, and changes to the tax relief on buy-to-let mortgages and wear and tear costs. Here are a few of the major reasons to invest in UK property.

Demand for property outweighs supply

The law of supply and demand has impacted the UK property market for centuries. A continuously growing population fuels demand for new homes. This boosts the price of homes and is great news for property investment in the UK.

According to the Office for National Statistics (ONS), the UK population is forecast to grow to:

  • 2 million in 2026
  • 70 million in 2029
  • 9 million in 2041

This is population growth of more than 11%. To put this in some perspective, the UK would need six cities the size of Birmingham to house it – or 13 Manchester, or 12 Liverpool. That’s a huge demand for extra housing.

UK property investment has continually proved itself as a solid investment

The average UK house price has doubled every eight to 10 years during the last 100 years. Even during financial crises, property investment in the UK has proved more resilient than other assets. When the stock market almost halved in 2008/9 because of the Global Financial Crisis, the average UK house price fell by just 14%.

Stock markets tend to have crashes every 10 years or so. The Oil Crisis was blamed for the slide in the mid-1970s. Then there was Black Monday in October 1987. The dotcom bubble burst in 2000. Throughout such stock market volatility, UK investment property has remained remarkably resilient and astoundingly stable. As ‘safe as houses’, as they say.

(Read our article “If you’re a long-term investor in stocks, you’re a long-term loser” to discover the truth your financial advisor would rather you not know.)

Inflation-proofed income – great for retirement

When you invest in buy-to-let property in the UK for the long term, you benefit from rental income that you control.

Generally, rental prices increase in line with inflation. Sometimes they rise slower, and sometimes faster.

If you are investing for retirement, the inflation-proofing quality of buy-to-let investment property in the UK will be very attractive to you – especially when measured against the cost of an annuity designed to protect your income against inflation.

You make money on other people’s money

In the UK, you can borrow to invest in property. This means you have the potential to make money on other people’s money, thus boosting your comparable return.

As an example, let’s consider an investment of £200,000, using £50,000 of your own money as a deposit and a £150,000 buy-to-let mortgage to fund your investment. Let’s say that the mortgage interest rate is 4.5%, and you achieve a gross rental yield of 7%.

You will make a gross income of 2.5% on the £150,000 you borrowed, after allowing for the interest payment. Put another way, your gross rental income is £7,250 (7% x £50,000 + 2.5% x £150,000), or 14.5% of the capital you invested.

It gets even better. Should the property value increase by, say, 30%, it would now be worth £260,000. Before costs and tax, this is a profit of £60,000. That’s 110% on your original £50,000 investment.

Such incredible potential returns are all thanks to the benefits of leveraging in property investment.

Perfect passive income

Finally, here is the one that will really make a difference to your life. Who wants to work for their money, when you could be sitting at home (or on a beach) enjoying the fruits of someone else’s labour? Hire an investment property manager to manage your property, and benefit from perfect passive income that could give you the lifestyle you deserve.

Summing up

For its potential to produce incredible passive income and capital growth over the long term, property investment in the UK is a highly attractive option. Projected population growth should help it to produce the kind of returns it has historically, as you benefit from using other people’s money to maximise the return on your own investment capital.

For more information about investing in UK property, contact the team Gladfish today,

Cheers,

James Cox

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