What makes the best investment property?
The world of property investment is a complicated one. There are so many different types of property available and so many places in which you can invest. Not every investor is the same, so there isn’t one blueprint to follow which will lead to the right investment for you. You can read more about where to invest in another of our blog posts here.
Consider all of your options
When considering your property investment there are three main investments you can make:
- A residential house
- A residential flat
- A commercial property
Let’s take a look at each of these options and see why you might consider each of these investment opportunities.
- A residential house – this is a typical option for most investors. Generally houses are purchased on a freehold basis, meaning that you own the property outright. As a result, you are free to do whatever you wish to the property (subject to any planning constraints) and are not subject to any ground rent or service charge. It is careful to bare in mind that you will need to maintain the structure of the house and will need to set aside money for big expenditure such as roof replacement. Residential houses tend to make good investments as there is a large market for them – on the whole more people prefer houses to flats.
- A residential flat – as alluded to in the previous paragraph, when you invest in a flat rather than a house, you are likely to buy the property on a leasehold basis or as share of freehold. This brings certain different challenges with it. You are likely to need to pay a service charge and potentially a ground rent. When there is a block of 10 flats, they all benefit from the roof, so if it needs replacing, it is important to have a fund to pay for it. The service charge helps pay for this type of expense as well as insurance, management costs etc. You can achieve a higher rent with flats, if centrally located it can be possible to rent on a short term basis, but you can have additional costs and complications.
- A commercial property – Many people are more comfortable looking at residential property, as an investment, than commercial property. It is what they know and as a result is often what they trust. However, the length of tenancy which can be achieved on a commercial property can be beneficial to an investor. In the UK, the average length of lease for a commercial property is 8 years. This allows for a well-planned financial forecast with guaranteed long term income while benefitting from any capital growth at the same time. For those unable to buy commercial property on their own there is the option of investing in an investment fund.
So which of these is the best property investment option? Well, for different individuals the best option is different, so look at things objectively and try to work out which fits with your needs best. If you are struggling to decide which is best for you contact us at email@example.com or fill out a contact form here.