Investing in buy-to-let properties can be an effective way to acquire valuable assets and enhance secondary income streams. Understanding the four common types of buy-to-let properties can help you make suitable investment decisions.
What Are Buy-To-Let Properties?
Buy-to-let properties involve purchasing a property, such as an apartment or house, with the primary intention of renting it out to generate rental income and in the long run achieving potential capital gains.
Below, we will explore the four common types of buy-to-let properties, including standard residential properties, student accommodation, holiday lets and HMOs, serving different markets.
4 Common Types Of Buy-To-Let Properties
1. Standard Residential Buy-To-Let Properties
Standard residential properties are typically let to working professionals or families, offering several benefits.
This type of buy-to-let property can provide a stable income, as tenants often stay for extended periods, ensuring consistent rental payments. At the end of each lease term, there is an opportunity to review and possibly increase the rent, contributing to periodic rent increases. Additionally, tenants usually pay a security deposit upfront, which helps cover potential damages or unpaid rent.
Depending on the locations and the condition of the property, gross rental yields for standard buy-to-let properties in the UK can vary widely, typically ranging from 2% to 12%. If you are considering investing in standard buy-to-let residential properties, our detailed analysis on the “Best Locations for Buy-to-Let Property Investment in the UK” can provide valuable insights, including the latest rental market report, to help guide your decision.
2. Buy-To-Let Student Accommodation
Investing in student accommodation presents a cost-effective and secure opportunity for generating rental income, making it a favoured avenue for developers and investors in the UK market. This type of buy-to-let property is specifically designed to cater to modern student living, often comprising cluster units or self-contained apartments.
The combination of relatively low property prices and high rental rates, fuelled by premium amenities, contributes to the high rental yields associated with student accommodation investments.
At Advantage Investment, we offer investors a guaranteed 7% NET yield on our latest student accommodation investment for a 10-year period, without charging any management fees. This offering surpasses the industry average, providing investors with stable returns over an extended duration. You might find our articles on “Student Accommodation Investments: Everything You Need To Know” informative and helpful for gaining more insights into this type of buy-to-let property.
3. Holiday Lets
Holiday lets cater to tourists by offering properties for short-term stays, sometimes as brief as overnight. Although these properties might have lower annual occupancy rates, the daily rental charges are typically higher, which can compensate for the reduced occupancy.
Holiday lets in desirable locations can appreciate in value, providing significant capital gains. Regular guest turnover ensures better maintenance, and targeting the upscale market can maximise revenue.
Additionally, holiday lets diversify investment portfolios and support local economies by attracting tourists. However, it’s essential to consider management costs, seasonal demand fluctuations, and regulatory changes.
Explore the investment opportunities for this type of buy-to-let property available with our featured holiday let, Park Hall Resort, which offers a Guaranteed 10% NET yield per annum assured for 3-5 years.
4. Houses In Multiple Occupation (HMOs)
HMOs (Houses in Multiple Occupation) are properties rented out to three or more unrelated individuals, each having their own room but often sharing common areas like kitchens and living rooms. These properties typically cater to students, young professionals, or workers.
One of the main advantages of HMOs is the potential for higher rental income. Market experts estimate that HMOs can yield 12–15%, compared to the 5–7% yield typically seen with single lets. Additionally, the rent for HMOs usually includes utilities, council tax, and broadband, which simplifies expenses for tenants and can make the property more attractive.
However, investing in HMOs also presents some challenges. Mortgages for HMOs often come with higher interest rates, and not all lenders offer them. Furthermore, HMOs are subject to stricter regulations and require specific licences, which adds to the complexity of managing this type of buy-to-let property. Given these factors, it is advisable to consult with a market expert before proceeding with an HMO investment.
At Advantage Investment, we understand that you want a hassle-free investment journey, which is why we keep everything in-house. Our dedicated investment consultant will work with you every step of the way, even if you decide to sell your property in the future. Contact Advantage Investment today and experience the unparalleled service that only our 360 approach can offer!
