How much money do you need to invest in property in the UK?

Are you considering property investment in the UK? Now is a great time to boost your property portfolio and income. In this blog, we’re answering the question, how much money do you need to invest in property in the UK? 

We are a dedicated property management company covering all areas of Manchester, the Northern Powerhouse. “How much money do I need to invest in UK property?” is a question that we often get asked. 

The truth is that there is no simple answer to this question. However, we can provide you with some useful insight and tips for property investment in Manchester. 

We’ll let you know the different factors that affect how much money you’ll need to invest and much more. 

What are the different types of properties on the UK property market?

If you’re brand new to the world of property investing, then don’t worry! At Parello, we can help you at every step. But we’re also on hand for those who know the ins and outs of investment and are looking to boost their current investments and find even more.

You might come across some different terminology when you begin your journey. For example, property types may also be referred to as Asset Classes. This means the same thing. Here are the most common asset classes. 

• Residential accommodation 
• Student accommodation - very popular in major UK cities 
• Serviced accommodation 

Taking the first steps for property investment 

Research properties 

Before you get started on building your investment portfolio, you need to decide on an investment budget. This will help you assess what you can get for your money. 

Looking into the current property prices is a great way to get this process going. Of course, you will be aware that house prices fluctuate quite a lot. 

Generally, the average property price in the UK is between £200,000 and £350,000. Many of these houses will require a deposit, which will be determined based on many factors, such as the mortgage length you choose. 

When choosing a house, you need to consider the location, tenant demand, potential value, interest rates and more. Read our blog on the top 10 places to invest in the UK. 

Mortgage costs 

It’s a great idea to look into your options for good mortgage deals. You can visit the bank or speak to a mortgage advisor. As the property is being bought as a buy-to-let, you will be required to pay a minimum of 25% deposit. The chosen interest rate influences the amount you will pay each month and how long you will pay the mortgage. 

Some properties cannot be purchased using a mortgage. Your mortgage lender will be able to advise you on this. 

Additional costs

Unfortunately, the costs of building your investment portfolio don’t end there. However, if you choose your properties carefully, you will have a great return on investment. 

Some additional costs can include conveyancing, surveys of the property, stamp duty, mortgage product fees and more. 

You must be aware of these aspects before you begin the process of property investment. You will also need to consider the ongoing costs of keeping the property in good condition. 

Consider your rental income 

You'll need to have a good idea of the rental yield in the area in which you plan to purchase the buy-to-let property. You can use factors such as purchase price, location, amenities and more to determine the monthly rent. 

Investing in buy-to-let property

Residential property buy-to-lets 

The most common property type to use for a buy-to-let is residential property. This type of process requires a landlord and tenant. These properties can be purchased with a mortgage that you will pay off over time. 

We mentioned some additional costs you’ll have to consider before, and it’s important to remember that these costs will increase with the property cost. For example, you will pay a higher stamp duty tax on a more expensive property. 

Additionally, mortgage payments work on percentages rather than exact costs. This means that your required deposit will vary based on the price of the property. It is not one set amount for all properties. 

Generally speaking, if you want to purchase a property valued at around £200,000, you will need to have a budget of around £50,000. In some cases, you may be able to proceed with more or less than this amount. Luxury city centre apartments are currently very popular, so you could look out for these! 

Student property investment

Student properties are usually found in cities and close to universities. Due to the limited space in university accommodation, there is often a high rental demand for student properties.

Student properties are quite different to other options in that you cannot use a mortgage to fund them in some cases. These properties must be paid for upfront, but they do usually come at a lower cost. You may even find that you don’t need to pay stamp duty land tax, but legal fees will still stand. These are known as ‘purpose-built student accommodation’ (PBSA).

Another option, in which a mortgage can be used to pay for the property, is known as a ‘house of multiple occupation’ (HMO).

Some student properties come with minimal ongoing costs, which can be extremely appealing to investors. These upfront investment properties also tend to have great rental yields. 

Serviced accommodation 

Serviced properties are mainly targeted to people looking for short-term lets, such as for holidays or business trips.

There are some rules and guidelines that must be followed regarding short-term lets. For example, they cannot be used in all areas. You will need to conduct research to ensure that you are operating legally. 

Similar to residential properties, the average mortgage deposit is likely to be around 25%, and you will have other costs to consider, such as legal fees and setting up the property. You are required to pay stamp duty land tax on these properties too. 

Due to higher rental costs, even with fewer guests staying throughout the year, you can still get a great return on your investment. 

What other costs do property investors need to think about? 

The exact costs you will need to be aware of will vary depending on the type of property that you invest in. Here are some of the most common additional costs you may have to consider. 

• Mortgage interest payments/mortgage repayments
• Upfront costs for buy-to-let investments
• Service charges for your buy-to-let properties 
• Ground rent 
• Maintenance costs involved with the rental property 
• Property management costs - find out more here!

Ultimately, now is a great time to invest in UK property, and the amount of money you really need depends on many factors, such as the property type, location and property value. For strong property investment strategies, keep an eye on the property market and property prices. 

Do you want to invest in property in Manchester? Contact our friendly team today for support with Manchester property management.