Investing in rental property these days isn’t as easy as it once was.
That’s because government legislations aimed at buy to let landlords, over the past several years, have made it more difficult to make the same kind of profits as before. So, what this means is that as a potential buy to let landlord, you have to be more careful about where you invest, and how. In other words, be spot on with your due diligence.
HMOs have the highest yields
And that means making sure your yield is high enough to make it all worthwhile. HMO properties, for instance, tend to have much higher yields than traditional buy to let. A typical HMO yield could be 12% compared to 6% for a buy to let. The HMO is higher, because you have more rental income from the one property, yet the one set of overheads.
HMOs tend to do particularly well in cities, where there are a lot of students. They do take quite a bit of setting up, however, and there are also licensing requirements. It would be possible to find a four-bedroom HMO for around £100,000 – again, depending on area. In some cities, especially those with a lot of students, there is a restriction on how many HMOs are allowed in a certain area.
These days, there is also a big market for upmarket HMOs ie rooms with en-suite bathrooms, high end finishes and cleaning services. Again, these are popular in big cities, but are aimed more at the young professional or couples. A much higher-spec is expected here, so expect to fork out a lot of money initially for furnishings.
Find out how Soured HMO Partner can help you build a HMO portfolio here.
Serviced apartments are a fast-growing sector
Serviced apartments are a newer form of rental investments. These are apartments that have all amenities on site, including kitchen appliances, laundry service, concierge and on-site parking. More of a hotel, than an upmarket HMO, serviced apartments are popular with those travelling for business. But they can also be booked by families or couples looking for a city break.
These can command high rents, but bear in mind, it’s short term rental, unlike buy to let or HMOs, where there’s usually a minimum six months’ lease signed. The cost of a serviced apartment depends on where it is and how high-spec it is, but you can expect to pay around £140,000 with a return of up to 9%, depending on the occupancy rate.
Investing in care homes is a secure investment
Investing in rooms in a care home can also prove a lucrative investment niche. Like serviced apartments, this form of rental has also become more popular with landlords disappointed with the lower yields from traditional buy to let. You’ll need to invest a lot to begin with though – £75,000 for an 8% return in the first year and 9% for the next time, with another percentage increase for years four and five is a typical example.
This is a hands-off investment, since the home itself is looked after by a housing association/care provider, it’s the kind of investment where it’s possible to continue with a professional day job. A good plus for investing in care homes is that there is rarely a void period – such is the demand for this type of accommodation in society today.
UK property is not just for the wealthy
One of the most common myths about property investing is that it’s only for ‘the rich.’ But it’s actually possible to start your investing career with no money. Sourcing property or getting involved in am assisted sale or rent to rent strategy, can bring in an income with very little upfront investment. Once you have capital, you can then look at other strategies, which will bring in even bigger returns and so on…
Get in touch!
Want help in kickstarting your property investment career? Then get in touch with the team here at Sourced Network franchise. We have decades of experience in the UK property investment sector and are happy to share what we’ve learned.
Download your copy of the Network prospectus now.
