Anyone considering investing in the UK property market with an initial sum of £100,000 is in a very favourable position.
Most property investors we work with have a budget between £50,000 and £100,000, so from our experiences of advising investors at this budget level, we know it offers a tremendous amount of flexibility and choice – you may choose to purchase a single, premium home or you may opt for multiple lower-cost properties. You could even consider a minor development project.
To help guide your decision-making, we’ve written this guide, which will:
- Highlight why the property market is a good choice compared to other assets
- Explain how to invest £100k in UK property
- Consider where to look
Why Choose Property?
£100,000 is a substantial sum of money. Therefore, you must be sure that the property market is a suitable investment for you.
One of the most significant benefits of choosing property is the option of securing leverage. For example, a £100,000 investment could act as a mortgage deposit towards a much more expensive home. This home can then be renovated and sold to generate a lump sum profit or rented to secure a passive monthly income.
Moreover, property is considered a very safe investment. Between 2007 and 2017, the number of households occupying the private rented sector grew an incredible 2.8 million (63%). Interestingly, in the same period, the number of properties bought with a mortgage fell from 9.8 million to 8.3 million. Space in the UK is finite, and that has never been more apparent than in our city centres. The capital growth opportunity is enormous, with the demand for luxury city centre apartments continually rising.
Additionally, property offers flexibility. You can choose to be as hands-on or hands-off as you like. Some investors love to be in the thick of it, dealing with their tenants personally. Conversely, other investors thrive with a passive approach, hiring a management agency to oversee their portfolio.
How To Invest £100k In Property In The UK
Investing in property is a relatively simple process. There are several factors to consider when looking for a suitable property, such as location, property type, tenant type, and more, but the actual process of investing any budget into property remains the same:
- Consider your goals
- Consider your risk appetite
- Decide on strategy
- Decide on location
- Find and purchase suitable property
1. Consider Your Goals
Before putting a £100k investment plan in place, you must consider your personal goals.
To set a goal, consider your principal motivation for property investment. For example, you might want to build a healthy pot of funds ready for when you retire. Then, turn your motivation into a SMART goal – Specific, Measurable, Achievable, Relevant, and Time-Bound.
For example, a SMART goal for a property investor who wants to build a retirement fund could be:
Build a property portfolio worth £500,000 by the age of 65.
2. Consider Your Risk Appetite
This is perhaps the most critical question that every investor needs to ask themselves at the beginning of their journey. There is no shame in the desire to secure safe, sound investments, even if that means returning a slightly lower profit than high-risk alternatives.
Many investors find that their risk appetite grows as their experience does. Thus, as your knowledge of the industry grows alongside your financial freedom, you might find yourself in a position willing to try higher-risk projects and strategies. Speaking of which…
3. Decide On Strategy
Your strategy will be influenced by where you are now (your starting situation), compared to where you want to be (your goal), tempered by your appetite for risk. There are many property investment strategies, but we’re major advocates of the buy-to-let model, so that’s what we’ll discuss here. Plus, buy-to-let is simple, requires relatively little hands-on work, and offers an excellent balance of risk and reward.
Let’s say you are currently 40 years of age. Continuing with the example from the section above, that means you have 25 years to turn your current £100,000 pot into the half a million you are working towards.
Given you have a good amount of time to make this happen, the buy-to-let model is an excellent choice. It allows you to play the long game and let market forces do much of the work for you.
Take your £100,000 budget and split it into two £50,000 chunks.
Each £50,000 chunk can be used as a deposit on a buy-to-let mortgage. A BTL mortgage typically has a maximum LTV of 75%, so you’ll be able to purchase a property worth up to £200,000. So, now you have a portfolio of two properties worth a total of £400,000.
Of course, this approach means you only own 25% of the portfolio. However, over the next 25 years, the rent from letting the property will cover and pay off both mortgages, resulting in full equity. In the meantime, the value of each property will have grown (not guaranteed, but it is the most likely outcome given the historic performance of the property market).
This should easily take you beyond a portfolio value of £500,000 – ready to sell up and cash in for your retirement.
4. Decide On Location
Once you know your strategy, you can start to look around for investment locations.
With a budget of £100,000, you are better off looking outside London and the South East. Even if you used the full £100,000 as a deposit on a single property in London, it likely wouldn’t be enough, with the average home costing £685,000.
Your £100,000 budget will stretch further in the North, though. And this is especially true if you’re interested in building a multi-property portfolio, in the manner we outlined above. Northern cities, such as Liverpool, Manchester and Sheffield are excellent options.
These locations offer excellent long-term potential and are attracting investors from all over the world. The lower property prices don’t necessarily mean they are a worse investment either – in fact, it’s the opposite. Due to lower purchase prices, investors can achieve stronger yields and run their portfolios more profitably.
5. Find & Purchase Suitable Property
After establishing your goals, risk appetite, strategy, and location, the next pivotal step is to find and purchase suitable properties that align with your investment plan. This step is both exciting and crucial, as it involves a series of actions:
- Research the market: Armed with your chosen location, delve into market research to identify the areas with the highest potential for growth and rental yield. Look at factors like local employment rates, future infrastructure projects, and average rental prices.
- Engage with local experts: Consider working with an advisor that specialises in buy-to-let properties. They can provide valuable insights into the best areas to invest in and help you find properties that fit your criteria. For reference, this is where we come in – feel free to get in touch to learn more.
- Conduct due diligence: Before making an offer on a property, conduct thorough due diligence. This includes reviewing the property’s condition, understanding the terms of the lease if it’s a leasehold, and assessing any potential legal issues.
- Secure financing: If you’re using buy-to-let mortgages, make sure you get a mortgage in principle before you start making offers. This shows sellers you’re serious and can move quickly.
- Make an offer: When you find a property that meets your requirements, make an informed offer based on your research.
- Solicitor and survey: Once your offer is accepted, instruct a solicitor to handle the legal work, and commission a property survey to ensure there are no hidden issues.
- Close the deal: Work with your solicitor and mortgage lender to finalise the purchase. This will include signing contracts, exchanging with the seller, and paying the deposit.
- Property management: Decide whether you will manage the property yourself or use a property management company. If you’re new to being a landlord or if you have multiple properties, a management company can be very helpful.
And that’s it. By following the steps above, you can invest your £100k budget into the UK property market effectively and efficiently – setting yourself on a path to reaching your investment goals.
£100k Investment Summary
- £100k is a substantial deposit to begin your property development career, and there is a range of strategies you could adopt.
- Carefully considering your goals and your risk appetite is essential before beginning any property development journey.
- A long-term buy-to-let strategy, split across two properties, is a solid approach for a £100,000 budget, although you may tailor accordingly based on your goals, level of risk, and starting situation.
- A £100k budget rules out London, but opens up the North – where incredible ROI can be achieved.
- Wondering how much money you need to invest in different types of property? Read our guide for more information.