Different Types of Property Investments

property investments - a line of houses in different colours

New properties are being built, which means more properties are coming on the market and the industry will continue to grow. Whether you’re thinking of buying a house to live in or for the purpose of an investment, it’s important to be in the know if you want to be in the housing market. This is especially the case if you’ve decided to be a new property investor and you’re clueless about the industry.

For example, did you know that there are multiple property investments? If you want to know more about the housing market, here are the different types of property investments to take note of.

Buy-to-let

As indicated by the name, buy-to-let is when a property is bought with the intention of having different tenants living in it. This is the most common type of property investment and will have tenants renting it. The rent should then ideally be used to pay off any mortgage borrowed, as well as other costs.

If you want a medium to long-term investment, this is the best option. A return can also be made through rental income. However, there are many factors to think about such as maintenance costs, management costs and dealing with tenants. Any property that you own can be used as a buy-to-let investment, but it will have to meet all the requirements.

Build-to-rent

This type of property investment focuses solely on renters. The properties are designed to meet their needs rather than those who are potential homebuyers. With a lot of high quality rental housing being built, people who want to rent can rest easy and can have access to on-site amenities, management, shared spaces, outdoor spaces and many more. There’s also an option to be managed by a management company.

HMO

HMO stands for houses in multiple occupation and describes properties that are meant for more than one household. This is a property investment where unrelated tenants will have to share one toilet, bathroom, kitchen or other facilities. Large HMOs are also available for at least five unrelated tenants to live in. However, if you want to invest in this property type, you will need to have a license for large HMOs. For smaller HMOs, they usually fall under licensing schemes. This type of property investment will require more management and is far more expensive, but it can provide a yield that is higher than average.

 

Off-plan

Off-plan is ideal for those who want to invest in a property before it’s been built. For individuals who want to be institutional and individual investors, this is a perfect type of investment for achieving a great return. A greater return is usually achieved due to the value of the property increasing after project completion.

Furnished holiday lets

When compared to long-term rental properties, these types of properties are usually rented on a short-term agreement. However, a great return can still be achieved since the daily or weekly charge for a furnished holiday let is higher. It’s also important to note that the target market won’t just be UK residents, but also those who live abroad. Therefore, choosing the right location is essential in order to attract nationals and the international market. Maintenance costs may also need to be considered.

Freehold and leasehold

Other types of property investments to consider are freehold and leasehold properties. You’ll find a lot of freehold properties in the UK since a majority of houses are freehold. A freehold property simply means that both the property and land are owned by the homeowner. Since both property and land will be owned, any maintenance job falls on the homeowner’s shoulders.

A leasehold property, however, is owned for the length of the lease agreement. Once the lease agreement has come to an end, ownership then returns to the freeholder. When investing in a leasehold property, you won’t own the land. If it’s a building, running and maintaining it isn’t your responsibility unlike its counterpart.

 

These are the different types of property investments you should know about. If you want to venture into the housing market, make sure you do some research on other investments and speak to some experts, such as our property services here. Alternatively, you can also have a chat with our estate and letting agents from our directory here for more information.

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