Investor Advice
CategoriesInvestor Advice

Anyone considering investing in the UK property market with an initial sum of £100,000 is in a very favourable position. £100,000 offers you a tremendous amount of flexibility and choice. You may choose to invest in a single premium home, multiple less expensive properties, or even consider minor development projects.

Why Choose Property?

£100,000 is a substantial sum of money. Therefore, you must be sure that property 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. Many investors love to be in the thick of it, dealing with their tenants personally. Conversely, other investors thrive with a completely passive approach, hiring management to oversee their portfolio.

Consider Your Goals

Before putting a £100k investment plan in place, you must consider your personal goals. This includes evaluating both your long and short term targets.

We recommend starting with your long-term goal. This should be your ‘why’ into property investment. For example, your aim might be to build a £500,000 retirement pot by the age of 65. If you are currently 45 years of age, you quickly understand that you have 20 years to turn your current £100,000 pot into the half a million you are working towards.

From here, you can develop short-term goals to help achieve your long-term solution. This may include purchasing two smaller homes with your initial payment of £100,000, concentrating on properties that generate decent yields but with a clear focus on capital growth. Then, after three years, withdraw the equity from the homes and use it for a deposit on another property. Repeat the process over the following decade.

Alternatively, property development or regeneration can be a faster way to produce large sums of money for those with the requisite expertise. These profits can then be reinvested to create a passive income. Whist the long-term goal will undoubtedly stay with you throughout your property career, your short-term targets should remain fluid. Changing markets mean that remaining adaptable will keep you in the best possible position.

What Is 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 take on higher risk projects. Those with a higher appetite for risk might choose the buy-to-sell option, which can offer excellent short-term profits.

The Best Location for 100k Buy-To-Let

Less expensive cities such as Liverpool were generally reserved for those will smaller initial investment pots. However, the various regeneration projects and the growth of the excellent universities are encouraging investors here from around the world. The lower price tag of some of these homes doesn’t necessarily mean they are a worse investment either. Conversely, although some would consider them slightly more ‘high risk’, there are incredible rental yields to be earned from this lower-cost housing.

And, as a bonus, your £100,000 budget will stretch further, especially if you’re interested in building a multi-property portfolio. Northern cities, such as Liverpool, Manchester and Sheffield, are excellent options for those hoping to purchase more than one home with their initial investment pot.

Premium Investment Locations

However, £100,000 offers the opportunity to invest in premium locations with higher price tags. London is the most obvious premium location and is generally the most sought-after area for investors concentrating on buy-to-let. Last year, the average house price in London was £674,491. The average flat in the city costs £542,215, and the typical sale price of a terraced house was £740,592.

That said, the enormous initial payment for a property in London means that the rental yields can be significantly smaller than those in more affordable cities. The average rent in London for new tenancies currently stands at £1,572 per month, after falling significantly due to the challenges associated with the pandemic. However, rents are expected to rise again steadily, as normality resumes in the capital.

Capital growth in London is astronomical. The house prices continue to grow every year, even considering challenges in the housing market. This means your home will continue to appreciate in value throughout your period of ownership.

As such, with a staggering amount of tenants searching for a home in the capital, London offers tremendous opportunities for both annual rental yields and capital growth. Those looking to diversify should be aware that the demand for excellent quality student accommodation is also very high in London, with over 40 higher education institutions across the city.

£100k Allows for Bulk Buying

Developers are keen to incentivise investors to purchase more than one home at once. A £100k budget is a significant balance that could attract serious discounts for bulk buying, dramatically increasing your return on investment. There are two main options where bulk buying is concerned.

The first is to purchase a small portfolio of homes that are already operational. This is an excellent option for those looking for an immediate return on investment. Such a portfolio might include two or even three small properties currently tenanted, and therefore already making a profit. It means that the properties will pretty much cater for themselves over the following years. After a set period, you may then decide to extract the equity and purchase another property. Again, diversification is vital here, and it would be wise to consider purpose-built student accommodation or a House in Multiple Occupation.

Alternatively, developers often offer significant discounts for bulk purchases of off-plan property. This would mean purchasing multiple apartments in the same tower block before the building is completed. This can be a great way to attract substantial capital growth, accumulating multiple homes before their completion. However, the passive rental income would not be immediately available in the way it would be when purchasing an already operational portfolio.

£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 short-term and long-term goals and your risk appetite is essential before beginning any property development journey.
  • £100k offers the opportunity to explore more premium locations, such as London. Although they might not provide the most robust rental yields, the capital growth can be enormous.
  • A £100k budget presents the option of bulk buying. This could involve purchasing an already operational portfolio or bulk buying multiple off-plan homes directly from a developer.

You can view our range of property investment options for all budgets here.
Please contact the team via [email protected] with any questions.

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