How to invest in property in the UK

Property has long been a popular way to invest, offering the potential for significant capital growth and - if you let it out - a steady stream of income. 

Here’s everything you need to know about how to invest in property.

Why invest in property?

While any investment is designed to generate profit, property has long been one of the most popular options.

If you’re buying to let, you could earn passive income over a long period far exceeding the initial outlay, with an average rental payment of £1,319, according to Zoopla research.

Then there is capital growth. Estate agent Savills, has forecast that average house prices will rise by over 20% in the UK between 2025 and 2029, with some prices in the North West and North East predicted to rise by nearly 30%.

What kinds of property investments are there?

When it comes to the property market, there are a few different options open to you:  

Buy-to-let

Buy-to-let involves purchasing a property and then renting it out to a tenant, hopefully providing you with a steady stream of rental income.

Property development

Property development is where you buy up an old or run down building in the hope of modernising it and then selling it on for a profit.

Buying a new build

You could buy a new build fresh from completion and look to sell that on for a profit – potentially having redecorated or redesigned it.

A property investment trust

A property investment trust is a way of pooling funds to invest with greater leverage.

A fund may choose to invest in property directly or in property companies or potentially even property bonds.

Property crowdfunding

Property crowdfunding platforms allow you to pool your funds with other investors to invest in a buy-to-let property.

The fees can be high, and your funds can be locked up for a long time, so seek expert financial advice before exploring this route.

How to get started in property investment

Investing in property can be a profitable move, with all the options listed above opening up different avenues for you.

If you’re looking to take on a more intensive project, consider buying a property in the early stage of its construction or refurbishing a project from scratch.

These often provide excellent opportunities to add value to a property. For example, you could add new, modern features that boost its value.

Buy to let may also appeal if you enjoy the prospect of managing a property.

Alternatively, investing in a fund will allow you to take more of a backseat, with your investment managed by a fund manager. There’s a lower barrier to entry with funds too as you won’t need  to raise a deposit.  

Funds will typically invest in commercial property which includes offices, retail or entertainment spaces or warehouses.  

Where are the best places to invest in property in the UK?

Prime locations to invest in property include London, the South East, and major cities like Manchester, Liverpool, Birmingham, Leeds, and Bristol.

London offers strong rental demand and capital growth potential despite high prices. Commuter towns near London can also provide solid returns.

Northern cities present affordable options with regeneration schemes boosting growth.

Other smart picks are university towns which have young tenant populations.

Key factors to consider when choosing an area to invest in include:

• Jobs and business growth

• Infrastructure projects

• Demographic trends that indicate an area's investment prospects

Consulting a local estate agent can help you identify up-and-coming neighbourhoods with development potential.

A savvy property investment in a strong location can deliver stable long-term returns.

How much money do you need to start investing in property?

You don’t need the full purchase price to buy an investment property - just like when you buy your own home, you can use a mortgage.

You will typically need a deposit of around 25% of the purchase price, meaning if you wanted to buy a £100,000 property, you would need at least £25,000 upfront.

Other properties, such as land, require the full purchase price paid in cash upfront.

On top of the purchase price, there are one-time fees to factor in when budgeting your investment amount such as stamp duty, legal and valuation fees.

And after purchasing, there will be ongoing costs to consider as part of owning the property.

These include mortgage repayments if you have a loan, as well as costs like ground rent and service charges for flats.

You will also need to budget for any improvements the property needs straightaway as well as ongoing maintenance costs.

It's wise to research property prices in your chosen area and understand all the potential costs involved.

This will help determine the total investment amount needed and ensure your property purchase goes smoothly.

What is a good return on investment for property in the UK?

A good target for a return on investment (ROI) from property in the UK is around 5%-7%.

Of course, this can vary depending on where you buy. For instance,  rental yields in London may be lower than in other parts of the country.

Many factors can impact your rental income and overall returns. It's important to research potential risks and rewards before deciding to invest.

Location, property type, tenant demand and more can all affect your profit. But with the right property in the right area, real estate investment can be a good way to generate extra earnings.

The key is going in with realistic expectations.

While returns of 5%-7% are feasible, nothing is guaranteed. But with the right due diligence and professional advice, you increase your chances of making a good return.

How to manage your property investment

Managing an investment means making sure that you can afford the expenditures needed to buy a property and having a good idea of what level of investment risk you are comfortable taking on.   

First, consider how you will finance the purchase of your property.

If you are developing a building or hoping to make minor adjustments before selling it again, you may be better off with a short-term financial loan that sees you through the renovation of a property and selling it.

If you’re looking to buy-to-let, on the other hand, you will need a buy-to-let mortgage.

This mortgage takes into account your own personal finances as well as the rent you could potentially earn from the property.

You should also be aware that while there are many reasons to invest in property, and it is broadly one of the safer investments you can make, no investment comes without a degree of risk.

Assess whether you are comfortable taking on more risk and what investment limits you need to set yourself.

How to spot a property money pit

Renovating a property can be a great way to earn a return on your investment, but it can also come with complications.

If the property ends up suffering problems that you weren’t aware of, you could end up ploughing huge sums of money on the property to make it habitable.

If you’re surveying a property, make sure you pay close attention to: 

• Signs of damp

• Subsidence

• Any structural work needed

• Administrative costs 

• Labour costs 

To provide a cushion for unexpected costs, it’s important to have a contingency fund.

Is property a better investment than stocks?

There are pros and cons to both property and stocks as investments.

Property can generate rental income and benefit from capital appreciation over time.

However, it also requires hands-on management, is illiquid, and carries risks like maintenance costs.

Stocks offer passive income through dividends and growth potential but are likely to be more volatile in the short term.

Over time stocks and shares tend to deliver higher returns than property but returns are not guaranteed and there may be years where property prices grow faster.

Consider your investment timeline, risk tolerance and diversification goals when deciding between the two.

For many people the decision will come down to personal preference.

Alternatively you can balance risk by investing in property as well as stocks and shares.

How can a financial adviser or mortgage broker help?

Investing in property can help you start planning for your financial future and independence.

Whether you’re looking to buy-to-let or invest in a property to sell, having the right financial advice is crucial when making the right decision. 

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