Top Three Types of Property Investment To Consider In 2023

Knowing where to begin with property investment can be overwhelming, especially as a beginner.

One of the most overwhelming aspects of this venture is knowing which kind of property to invest in.

You may be wondering, what exactly are the different types of property investments?

Well, there are many different property types available for investors to invest in, and the strategy you eventually decide to use will depend on many factors.

They are:

• The amount of return you expect
• How much you’re willing to spend
• The advantages and disadvantages of the chosen strategy.

So, without further ado, here are some of the most common kinds of property investment to consider in 2023!

Residential Buy-to-Let

With many benefits and the ability to keep your costs low, this type of rental property is a solid choice for many investors.

A buy-to-let property is one which has been purchased with the intention of being let out to tenants.

This could be an apartment or a house – essentially any property that can be lived in long-term.

The pros of this investment are:

• The vast array of choices on offer, with many buy-to-let opportunities available on the market right now
• High tenant demand for residential rental homes – meaning that you can expect a steady influx of long-term tenants for the foreseeable future
• Rent is rising rapidly in the UK, potentially making for lucrative rental income (so long as you invest in the right area.
• The availability of buy-to-let mortgages helps spread the cost of investing over time.
• Typically one of the most low-risk strategies due to the strength and resilience of the residential market.

The cons of this investment are:

• Interest rates on buy-to-let mortgages have been on the rise, meaning some may struggle to secure a fixed-rate mortgage.
• Investing in the wrong area could result in limited returns.
• If you invest in the wrong area, such as where rental demand is low, and house prices are stagnant, returns could be limited.
• This is a long-haul strategy, so those that aren’t prepared to hold onto a property for a significant time should avoid traditional buy-to-let options.
• You will need to be prepared to perform the duties of a landlord or utilise the services of a property management company (which could take up a huge chunk of your budget).

Buy-to-Sell

Buy-to-sell (also known as house flipping) is a strategy that involves purchasing a property with the intention of later selling it for profit.

The property in question might require some renovation work before it can go on the market, which allows the investor to purchase it for a low price.

The pros of this investment are:

• Lower prices depending on how much renovation is required
• This a good option for more experienced investors that know how to add value to a property.

The cons of this investment are:

• It only offers returns through capital appreciation – meaning that investors will be missing out on both the rental returns and capital growth that come alongside buy-to-let investments.
• A huge amount of commitment, in-depth knowledge and experience is needed for this type of investment to flourish.
• This can be an extremely expensive endeavour, and if completed incorrectly, you could end up losing a significant amount of money.

Commercial Property

Commercial properties on ones that are rented out to businesses.

These can function as offices, retail spaces, or warehouses.

Like residential buy-to-let, commercial property investment can bring long-term tenants that can bring in regular rental income.

The pros of this investment are:

• It can offer attractive rental returns, with average rental costs that are often higher than residential buy-to-let.
• As businesses are often reluctant to uproot and move offices, tenants will usually stay for long periods of time.
• Tenants are usually responsible for maintenance rather than the owners, meaning there will be fewer ongoing costs in comparison to residential properties.

The cons of this investment are:

• Demand for commercial properties can plummet dramatically, depending upon certain economic factors.
• You can sometimes struggle to secure suitable tenants, potentially causing longer void periods.
• As a result of their larger size, these properties are typically far more expensive and can come with their own bespoke additional costs.
• Exit strategies are difficult to put in place, as it can be harder to sell commercial properties.

Which Property Investment Strategy is the Best? 

Well, the frustrating answer is this:

There is not one singular, perfect strategy to invest in property.

As a venture, property investment is entirely dependent upon your needs.

Specifics like your budget, how long you wish to hold onto your property and how much income you want to secure will all influence the path you take.

Just ensure that you take the time to research your options fully and in-depth before taking the final leap – it could make the difference between complete failure and massive success!