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Property Investment for Beginners

This article was updated on Fri 9 February 2024

Designed interior for a kitchen in a luxury property investment

We all hear of impressive property investment stories. Overflowing portfolios, a huge amount of rental income and of course. Tales of increasing property values when buying to sell. But as a beginner property investor, how do you start?

In this property investment for beginners guide, we’ll be covering all aspects of property investment, from getting stuck in with rental properties to working out the right investment strategy for you.

What is an investment property?

Put simply, an investment property is a property you either purchase at a low price with the intention of being renovated and sold or a property you buy with the aim of gaining a rental income.

There are a whole number of reasons why you may find interest in property investment. Whether you’re looking to purchase your first rental property, or thinking about trying your hand at flipping houses – property investors all have their own investment strategy to maximise their income.

The benefits of property investment

Finding the right investment strategy is key for beginner real estate investors. But before you start in the world of property investment, let’s cover a few of the main benefits:

Capital growth

Capital growth is how much your investment property increases in value since you originally making a purchase. Looking at the UK property market, you can achieve impressive capital growth with strategic research informing your property investments.

Capital growth is typically calculated as a percentage, for example, if the property sees an in value from £200,000 to £220,000, you would have 10% capital gains. With the UK property market boomin, We have see spikes in the average property price. For example a visible increase by 15.5% over the year 2022 reading up to July.

Rental income

Property investment for beginners doesn’t necessarily have to involve flipping houses for capital appreciation. Many of those looking for their first investment property consider starting their portfolio with rental properties.

Rental yield is the amount of rent you receive for a rental property throughout a year as a percentage of the total money paid for the property in question. Investing in a property for a rental can be a great property investment for beginners at the start of their property career.

Cash flow

You may already know that getting started with property investment can provide you with regular monthly cash flow and long-term appreciation. Building up a larger down payment for an investment property can help you to receive a better interest rate and loan terms.

Secondly, in doing this, you’ll have more cash flow available, giving you the opportunity to build up your reserve account over time. As your cash flow builds, you’ll then be able to contemplate your next property investment opportunity.

Property investment: What to consider

Now that we’ve covered the benefits of property investment, it’s important to understand where to focus your efforts as a property investor. In any circumstances, buying a property can be a long process, so it will require some patience.

First off, you need to ensure that you are financially ready to become a property investor. Whether you’re looking to buy a property with cash or mortgage your new property investment, there are also other costs you need to factor into your new venture – such as legal fees, surveyor’s fees etc.

But what else is involved? What else is there to consider? Here are just a few things to take into account beforehand:

  • Geography – While London has the highest house prices in the UK – which can be great for selling – if you’re looking to buy, they could be out of your initial budget as a beginner investor. While the capital may experience high house price growth, this may not reflect elsewhere in the UK. When investing it’s also important to consider any regeneration plans for the area.
  • Off-plan properties – Off-plan properties are those that are still in the construction phase but are available to buy now. These are usually below market value, therefore attractive as property investments.
  • Budgeting – Before starting with property investment, it’s essential to detail a budget. This will help you find the right type of investment property.

Property investment types

But aside from being financially ready to step into property investment, you will need to decide on the type of property you’re looking to buy and how it can benefit you as a new property investor.

Buy to let

One of the most popular investment types is buy to let properties. These generate returns via rental income. Generally, this type of property investment allows for growth through capital as well as monthly income.

Buy to let properties are perfect for those looking for long-term financial benefits, with the opportunity for capital growth returns later on down the line if the property were to be sold.

Buy to sell properties

Often referred to as ‘flipping houses’, a buy to sell investment property is more common with experienced investors. These types of properties typically require a huge amount of refurbishment/renovation and therefore, a higher cash injection.

HMOs (Houses in multiple occupations)

HMOs are an increasingly lucrative market for landlords seeking maximum return and higher rental yields. In regards to property investment for beginners, HMOs can be incredibly tempting due to their high rental yields and minimal income loss during void periods, since other tenants can cover the income.

In terms of investment funds, this type of property investment can require complex licensing requirements, depending on the property location, as well as substantial property management, maintenance and additional costs.

Student property investment

Very similar to your typical buy to let investment property, student accommodation can be a lucrative strategy for budding property investors. The main differences between these two types of buy to let properties are the type of tenants and usually, location. Student accommodation should always be within close proximity to relevant educational institutions – most frequently in the UK’s prime cities.

Get started with Knight Knox

As a new property investor, getting started doesn’t have to be a long and confusing process.

With decades of experience in the property market, we are in the perfect place to help budding investors find the best properties to build a successful portfolio with great returns and secure investment strategies.

If it’s an interest of yours to step into the world of property investment, get in touch with us to learn more.

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