There are many ways to get a foothold in the UK property market.
From buy to let to holiday lets, renting to social housing tenants or using a rent to rent strategy, you’re certainly not stuck for methods. What you may get stuck with though, is working out what is the right strategy for you. That means the kind of strategy that fits into your current lifestyle and that gives you the kind of returns you need. Here are just a few typical beginner strategies:
‘Vanilla’ Buy to Let
Traditionally, buy to let was the most popular strategy. And certainly, it’s a very straightforward method. You simply buy a property and rent it out so that your mortgage and bills are covered and there’s a little left over as profit. At the same time, you benefit from capital accruing over the years. Changes to landlord tax rules and increased Stamp Duty on second homes has made good profits harder to achieve though.
Pros:
- Easy to get started
- Buy to let mortgages are available
- You can get a letting agent to manage the property and tenants for a cost
Cons:
- Profits aren’t as good as they were
Housing Benefits Tenants
Local authorities pay the rent of tenants who claim Universal Credit. The lets tend to be longer (for two years) and you’re guaranteed to be paid on time every month. Not only that, but it’s usually a higher rent than you’d get in the private rented sector.
You won’t get to choose the tenants yourself however, and your property belongs to that council for that period i.e. you can’t sell it or re-let it if you don’t like who has moved in.
Pros:
- Better yields than in the private rented market
- Always paid on time
- If tenants were to cause damage to your property the council should repair and redecorate (I’ve moved because I think this is a pro – in any one of these strategies tenants can cause damage)
Cons:
- Properties are usually in less desirable areas
Holiday Lets
This is property rented out on a seasonal basis i.e. over the summer months and during Holidays. Although it is rented out at a premium during these times, you’ll have to reduce the price for occupancy during quieter times.
There’s a lot more work involved in this type of strategy than you probably imagine, especially when it comes to marketing the property.
Pros:
- Good if filled near constantly during the summer
Cons:
- Lots of changeovers and forking out for marketing costs
- Not easy to get a mortgage for
Beginners in the property market often have a friend or work colleague who have invested themselves and can give them basic guidance. Other people read books to familiarise themselves with various strategies.
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