Those who are considering UK investment property need to decipher how much money they have available to invest. To a lot of people, £150,000 is a big sum of money. Perhaps surprisingly, in many parts of the UK you would struggle to find a house under that amount. According to Statista, the average house price in the United Kingdom in July 2019 was just shy of £233,000. Of course, that is an average and investors can source cheaper properties for buy to let, but these properties run the risk of being in an undesirable location or requiring maintenance work to bring the house up-to-date, which will affect rental yields.
If you have £150,000 that you want to invest you may be looking for some sage advice on how to invest it. The first step could be to from a property investment strategy to have clarify on what sort of property you are comfortable with. You may also want to consider these seven tips on how to invest in property. Below we discuss property sectors that investors should consider if they have limited capital, and how to make the more traditional sectors work for you.
Buy to let property is on the more expensive end of the scale when it comes to property investment. As we mentioned before, average house prices in the UK are just shy of £233,000 compared with student property investments or care home investments which start around the £60,000 mark.
The advantage of buy to let investing if you have limited available funds is that you can get a mortgage to cover most of the cost. You generally only need a deposit and enough money to cover legal fees. If you are buying off plan there would be a payment plan in place, so you only make stage payments over a set period until the property is completed. This allows you time to raise capital or arrange a mortgage.
£233,000 is the average in the UK overall, but there are many places where property is less expensive. Buying property in London is going to be very expensive and in general the yields are not as high as you can find in other cities. The average price in Liverpool is £182,517, just over £50,000 cheaper. Not only are property prices cheaper and therefore more accessible to the average investor, but rental yields are also some of the best in the country.
It’s also worth exploring towns and cities, or areas of certain towns and cities that are undergoing regeneration. Places like Luton don’t often feature in the Sunday Times Best Place to Live table, but it’s an affordable alternative to London with excellent transport links into the capital. Commuters can be in London in as little as 22 minutes by train. £1.5 billion pounds is being invested in the town to regenerate the town centre and bring about the creation of 18,500 new jobs. Key elements of the regeneration plan include three linked enterprise zones surrounding the airport that will host aerospace businesses, support services to airlines and hotels, the development of Butterfield Business Park and improvements to Luton’s shopping centre. These improvement plans have earmarked Luton as one of the best places to invest, according to the Sunday Times.
It would be a prudent idea for investors to consider places such as Luton if they are investing for capital growth. Average property prices in the London commuter town are £272,181, but with regeneration plans we can see that skyrocketing in the coming years. One bedroom apartments in properties such as The Orion start at £179,900. Although that is slightly over the £150,000-mark, completion is not until the end of 2020, so investors have some time to raise funds.
Alternatively, if investors are looking for good value property that will achieve rental yields as opposed to capital growth, they could consider Liverpool buy to let investments. Liverpool dominates the tables when it comes to the best location for buy to let yields. In TotallyMoney’s list of the top 25 buy to let areas in the UK, six Liverpool postcodes featured (L1, L2, L3, L4, L6 and L11). In L1, yields of up to 10% can be achieved.
Check out our best places to invest in UK property in 2020 to get a more in depth understanding of places you should be considering.
Student and care homes are classed as commercial property investments and are ideal if you have £150,000 or less in cash. These are usually cash-only investments, but they start from a lower base compared to traditional buy to let. Buy to let student accommodation for example, can start from £65,000 and offer yields often at 7%+ for a set number of years. Care home investments also start from the £60,000 mark and offer yields of up to 10% that are underwritten in a contract.
If you invest in purpose-built student accommodation (PBSA), or care homes, usually there will be a management company in place. They will undertake the day-to-day running of the property, ensuring it is maintained and organising tenancies. You will often receive a guaranteed rental yield for a certain number of years and after that rental income will be dictated by the market. These types of investments are ideal for people trying to find out how to invest in property with high yields. As a general rule of thumb, commercial investments such as student and care home are less likely to achieve the levels of capital growth you’d find with a traditional buy to let.
There are several ways you could invest in property with less than £150,000. One is property crowdfunding. This is where a small number of investors group together and purchase a property between them. There are a few benefits to property crowdfunding, one is that investors can access property investment with a small amount of capital, and it allows investors to diversify their portfolio more easily. Property crowdfunding could be a good choice for those with limited funds as you can invest from as little as £100. However, it is less flexible than traditional property investment in that you might be tied into a contract where there could be a penalty for withdrawing funds early. Additionally, returns may not be as good as other high yield property investment options.
As we said before, commercial property investments such as student and care start from a lower amount. If these are bought off-plan, often you’d only need a small deposit and then you would have a few years depending on completion date to raise the capital as the remainder would be paid in installments. Off plan investment properties could be ideal for someone who currently has a low cash deposit but is anticipating more available funds in the future.
It’s worth noting that stamp duty will be applicable on buy to let property. You should keep this in mind when you are considering UK property investment as these additional costs might push you over the £150,000 mark.
Student property and care homes are classed as commercial transactions and are exempt from stamp duty if the purchase price is under £150,000. For those who wish to invest £150,000 or thereabouts in commercial property such as student or care homes, we suggest ensuring the total amount does not exceed £150,000 to avoid paying stamp duty. Investors should also take into consideration other costs such as legal fees and property sourcing fees for those with bespoke requirements.
One Touch Property has over ten years’ experience of sourcing investment property and our investment consultants can provide guidance on a property investment that will help you achieve your financial goals. Contact us today to take the first step and learn more about property investment opportunities available to you and how you can invest in property with £150,000 or less in capital.
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