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Getting started with real estate investment in the UK

Getting started with real estate investment in the UK
Image source: Getty Images.


Tumultuous times such as being in the wake of a pandemic suddenly make tangible investments, like property, rather attractive. Of course, property isn’t immune to economic shockwaves, but its material value does feel reassuringly solid. So, if you’ve toyed with the idea of investing in bricks and mortar, here are some tips to get you started in UK real estate investment. 

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Work out what you can afford

Unless you’re sitting on a mountain of money, affordability is often the greatest barrier to buying real estate in the UK. For most of us, that means working out what’s affordable with the savings we have now or could potentially amass.

Either way, becoming a real estate investor rarely happens overnight, giving you time to build up reserves. If you’re looking for quick and easy ways to save, check out these budgeting tips. Alternatively, see if you can supercharge the savings you have with one of these top savings accounts.

Whatever your financial situation, the good news is that there are various ways to invest in UK real estate, so lack of funds doesn’t have to be prohibitive.

Choose a real estate investment strategy

How you invest in real estate may well be influenced by what you can afford. Nevertheless, it’s wise to familiarise yourself with all the different avenues. You might even discover an investment path you weren’t aware of.

In the UK, there are several ways of making a real estate investment. Bear in mind there are pros and cons to all, so research is crucial. For example, options include:

Buy-to-let

Buying property which we then rent out is probably what springs to mind when most of us think about real estate investment in the UK. It’s an expensive but worthy long-term option if you like the idea of being a landlord or want a relatively consistent income stream. Here’s how to get started with buy-to-let.

Real estate development

Buying and developing, building or renovating takes time and money – usually a lot of it. Investing in real estate like is more likely to suit you if you have building skills or trusted contacts at hand who can help you at every step.

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Flipping for profit

This is when you buy property and then sell it (hopefully) for a profit. If you time it right, you can make considerable sums of money in a relatively short space of time. Time it wrong, and you could be left holding the keys indefinitely. If you choose to flip, it’s sensible to have a back-up plan such as turning the property into a rental if the market dramatically cools.

Real estate investment funds

This is ideal for hands-off investors who don’t want to get involved on a day-to-day basis. In most cases, your money will be part of a pooled fund and used to invest in property or a portfolio of properties. You’ll have to pay for your money to be managed. Plus, you’re unlikely to be able to specify exactly where your investment will be made.

Property crowdfunding

This is basically pitching in for a property and sharing out the proceeds – whether that’s rent or profit from a sale. Like real estate investment funds, this is another hands-off way to invest in property. However, unlike a fund, you get to choose where and in what your money is invested. You can crowdfund property with very little upfront cash. In some cases you need as little as £100, making it a good place to start. Examples of crowdfunding platforms include TheHouseCrowd, Property Partner and Yielders.   

Understand the risks

Understanding the risks can help you build contingency plans. For example, if you go down the buy-to-let landlord route, you’re likely to experience the occasional lull in tenancies or the odd nightmare tenant. Similarly, the market might not be right for a property flip. Or, there could be a downturn in the value of your crowdfunded house or real estate fund.

The point is, being prepared and having an exit plan or emergency fund (or both) can help you weather any storms. Knowing the risks can also give you breathing space. This can allow you to make the right long-term decisions for you, instead of knee-jerk reactions that you might end up regretting.  

Remember that the UK real estate market is a constantly changing landscape. So, however you choose to invest, it’s vital to do your homework.

 

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