How To Make Profitable Property Investments in 2023/24

Are you interested in property investing? Do you want to learn how to make money from property? Maybe you are already an investor or landlord.

Well, you have come to the right place! Our in-depth guide explores how to make profitable property investments in 2023 and beyond. This introductory guide can show you how to maximise your returns, and potentially increase the money you already make from property.

Over the next few pages we discuss the best areas to invest, how to get started, and what type of property investment is best suited for your needs.

So if you are looking to get into property investing read on!

Why Invest in Property?

Investing in property is not a new concept, it has long been a popular way to build wealth and generate income. But amid all the doom and gloom presented in the press about rising interest rates and property values decreasing, the lay-person could be forgiven for thinking that now is a bad time to consider investing in a property, however this isn't the case, and for many, now is the BEST time to invest in property.

This guide is going to show you how property investing in 2023 is actually poised to be a very lucrative venture, but firstly it's important to understand the reasons why people invest in property and make sure it's right for you.

First and foremost, property is considered a stable and reliable investment option. Unlike stocks or other investments that can be highly volatile, property values tend to appreciate over time, providing a solid return on investment, this is known as capital appreciation

In addition, property investments can generate ongoing income through rental yields, making it a popular choice for those looking to generate passive income streams.

With demand for rental properties expected to remain strong in 2023 and beyond, the potential for steady rental income is high.

Another benefit of investing in property is the potential tax advantages. Property investors can claim a variety of tax deductions related to property expenses, including interest on loans, repairs, and maintenance costs.

Furthermore, property is a tangible asset that can be leveraged to access finance for other investments or business ventures. This means that investing in property can provide a stepping stone to building a more diverse investment portfolio.

Finally, tied into the initial point on capital appreciation, investing in property provides the potential for long-term wealth creation. By holding onto properties for several years and allowing them to appreciate in value, investors can build significant wealth over time.

Overall, there are many compelling reasons to invest in property. From stable returns and ongoing income to tax advantages and long-term wealth creation, property investing is a solid investment strategy that can provide financial benefits for years to come, whether it's to add to your current income, to replace your current income stream or as a pension scheme.

How to Get Started

If you're interested in making profitable property investments in 2023, the first step is to understand your investment goals and objectives

What returns are you looking for? Have you taken tax into account? How diversified are your investments? How much involvement do you want to have?

Once you have a clear idea of what you want to achieve, you can start exploring the different types of property investments available to you.

Investors looking for long term goals may want to consider standard buy-to-let properties whereas those wanting quicker higher returns may consider short-term lets, or holiday lets, and depending on tenant demand in their chosen location another option for high returns is student housing and the growing market for purpose-built student accommodation (PBSA). Other options include property sourcing, flipping, auctions and property funds.

When it comes to selecting the best investments, it's important to do your research. This might involve working with investment agents or managing agents who can provide insight into local market trends and potential returns. It's also worth keeping an eye on inflation, which is proving a worldwide challenge, but particularly sticky in the UK.

Ultimately, the best way to get started is to take a structured and disciplined approach to property investing.

Multi-asset investors should consider including property as part of a diversified portfolio, while individual investors should aim to select assets that align with their specific goals and risk appetite.

By carefully assessing your options and seeking professional advice where necessary, you can build a property portfolio that generates significant returns over the long term.

Types of Property Investments to Consider

When it comes to investing in property, there are a number of different types of investments that you can consider. Here are some of the most popular options:

1. Buy-to-Let: This is one of the most common types of property investment, where you buy a property and rent it out to tenants for the long term. This can be a great way to generate regular income, as well as benefiting from any potential increases in property value.

2. Short-Term Holiday Lets: With the rise of platforms like Airbnb, short-term holiday lets have become a popular option for property investors. This type of investment can be particularly profitable in tourist hotspots or cities with high demand for short-term accommodation.

3. Corporate Serviced Accommodation: This is another type of short-term rental investment, but aimed at corporate clients rather than holidaymakers. This can be a good option for investors who want to focus on longer-term bookings and more stable income streams. It’s advisable to speak to experts in this sector as they will know the regulations and have relationships with relocation agents.

4. PBSA (Purpose Built Student Accommodation): With more students than ever attending university, purpose-built student accommodation has become a popular investment choice. However, this type of investment can be subject to higher levels of regulation and competition.

5. Flips: Flipping a property involves buying a property, renovating it and selling it on for a profit. This can be a high-risk strategy, but can also lead to significant returns if done correctly.

6. Joint Venture: Finally, a joint venture involves teaming up with other investors to pool resources and invest in a property together. This can be a good way to spread risk and take on larger projects than you would be able to do alone.

There are other options open to you, such as REITS, Property Bonds or Loan Notes, but so as to not complicate the information provided here, we will stick to the main direct involved options listed above.

Of course, the best type of investment for you will depend on your personal circumstances, experience and financial goals. It's important to do your research and speak to experts to ensure you make an informed decision.

Remember, UK inflation is proving sticky, so it's important to consider the impact this may have on your investments.

Best Areas to Invest in Property in 2023

If you're considering investing in property, one of the key decisions you'll need to make is where to invest. While it's tempting to focus on the big cities like London, Manchester, and Birmingham, these areas can come with high price tags and fierce competition, and depending on the type of investment sector, saturation. Saturation is where there is too much availability for the type of rental you are also trying to let, if there is too much supply, outstripping demand, then prices will will drop.

One strategy for finding profitable property investments is to look to secondary towns and cities where property prices are cheaper but demand remains high. These areas can be ideal for landlords looking to get started or expand their property portfolio. Halifax, Preston, and Hull are just a few examples of such secondary places where investors can enjoy good returns.

If you have cash sitting in a bank account then it's worth considering investing in PBSA (Purpose Built Student Accommodation) properties in areas with strong universities. Student housing is a consistently in-demand market, and a good investment in the right location can yield strong returns of 7% and more. However, you must still be wary of saturation.

Inflation is a worldwide challenge, but UK inflation is proving to be especially stubborn. As a result, it's important to carefully consider areas where property prices may be able to keep up with rising inflation rates. By looking to secondary towns and cities with good growth prospects and strong demand, landlords can make sure their investments continue to hold their value and even grow over time. Look for areas where there are redevelopment schemes, where, over time, value will be added by the local council and inward investment.

In summary, investing in property is an excellent way to generate longterm wealth, but finding the right area to invest is key. By focusing on secondary towns and cities with high demand and good growth prospects, landlords can secure strong returns.

Location, location, location!

Financing Your Property Investment

When it comes to financing your property investment, there are a few things to consider. In the past, many investors would take out interest-only mortgages for buy-to-let properties, allowing them to leverage their investments and increase their potential profits. However, with interest rates on the rise in 2023, it's important to be cautious before committing to a mortgage.

One alternative option is to consider a cash purchase. With many landlords selling their properties due to being overcommitted on their own mortgages, there are some great deals to be had. Not only can you potentially get a good deal, potentially below market value, but you also avoid the risk of interest rate hikes in the future.

Of course, not everyone has the funds available to make a cash purchase. If you need to take out a mortgage, it's important to do your research and ensure that you can afford the repayments even if interest rates do go up. Consider working with a financial advisor to determine what type of mortgage is right for you, and to make sure that you're not taking on too much debt. Then you need to ensure that your property is in the right area, with the highest demand and right type of potential tenants that will, not only maximise your occupancy, but make sure you can get the fairest, but highest rate of rent, giving you the best yield possible.

Ultimately, the key to financing your property investment is to be smart and strategic. Look for opportunities where you can potentially get a good deal, and make sure that you're not taking on too much risk or debt. With the right approach, investing in property can be a profitable and rewarding venture in 2023 and beyond.

Understanding Property Cycles and Market Trends

To truly become a successful property investor, it is essential to understand the property cycle and market trends. The property cycle refers to the pattern of rising and falling property prices that repeat themselves over 18 years. It is extremely likely that if you are reading this then you have got a memory of at least one property market crash, and therefore you have seen the direct results of this cycle, or at least part of it. The cycle was first observed by an economist, Fred Harrison, who not only found that the property market appeared to be cyclical over 18 years, but that it could be broken into 4 stages. Fred looked at 100's of years' worth of data, and he mapped the cycle back over a period of 300 years, concluding that you can see it following this pattern time and time again.

It is divided into four distinct stages:

1. Recovery - This is when the property market is recovering from a downturn and prices start to rise slowly. You can see the signs of this phase in your own town or city, look for building work, look for developers and large house builders putting up blocks of apartments, and new housing estates. With new estates come more people, this in turn brings more consumer spending, pushing prices up.

2. Expansion - This is when property prices start to rise at a faster pace due to strong demand from buyers and limited supply. Confidence in the market returns, the media and banks give reason to buy, positive headlines and offering easy borrowing.

3. Peak - This is the point when property prices reach their highest point and start to slow down as supply catches up with demand.

4. Contraction - This is when property prices start to fall due to oversupply and decreasing demand.

Graph of average UK house prices since 1952

It's important to remember that a crash in the property market is inevitable, and at some point, prices will fall. However, understanding the property cycle can help you decide when to buy or sell your property.

When the market is in a recovery or expansion stage, it's a good time to buy, as prices are relatively low, and you can make a significant profit when prices rise. On the other hand, when the market reaches its peak or contraction stage, it's better to hold or even sell your property to avoid losing money.

It's also important not to panic and sell your property when prices are falling. Selling at the wrong point in the cycle could lead to significant financial losses. Instead, prepare for these times by putting funds aside to weather the storm.

One crucial thing to remember is to avoid getting carried away by market hype and media reports, do you remember 2006 and what the headlines were saying, instead of warning you that you have two years before a potential crash in the market, they were hyping up 100% and 110% mortgages! Always do your research and understand the trends before making any investment decisions. It's thankfully fast becoming a distant memory, but the Covid outbreak in 2020 bought headlines stating predictions of a crash, but in fact prices rose 20% over the next couple of years.

Finally, always be ready to sell when everyone else is buying and buy when everyone else is selling. This approach will help you make the most of your investment and achieve long-term success.

A point to remember that is both logical, and mundane, but important: The market and property prices are cyclical, and so prices will surge and then decrease, dropping back, in some cases below their original point before the surge, this is nothing to be overly worried about, as long as you remember this when investing, and ensure you are covered for it.

Tips for Successful Property Investing

Property investing can be a lucrative way to earn money, but it’s not without its challenges. Here are some quick top tips to help you make successful property investments in 2023:

1. Keep your properties in good shape. Tenants want a comfortable and safe place to live, so make sure your properties meet their requirements. This means keeping them well-maintained and ensuring they’re up to code. This may sound obvious but this is important whether its a long-term rental or a short-term letting property, as your tenants and their happiness is your potential income. For long-term buy-to-let properties, your tenants are likely to look after the place better if its in decent condition at the beginning of the tenancy. If you are going down the short-term letting and holiday let route then reviews can make or break a successful STL property investment, if the property is in poor condition then you are more likely to receive poor reviews and tenants will not want to book your property in the future.

2. Practice good tenancy management. Whether you manage your properties yourself or use an agent, it’s important to be responsive to tenant needs and maintain good communication. Happy tenants are more likely to renew their leases. There is a lot to consider when managing a property so consider using an agent to manage your investments, however ensure you factor this cost into your figures. Your time is also expensive and a good management agent can free your time, and cost you less in the long term.

3. Know the rules and regulations. Keep up to date with the latest laws and regulations affecting your properties, particularly if you self-manage. This will help you avoid costly mistakes. If you are new to property investing then it's a good idea to speak to an agent, or spend your time researching, Google is your friend.

4. Be prepared to deal with problems. No property investment is without its challenges, so be ready to address issues when they arise. Having a plan in place can help minimize disruption and maintain your reputation as a landlord.

5. Have your finances in order. This means having a clear understanding of your expenses and income, as well as access to capital for emergencies or new investments. As discussed earlier, it is a good idea to build a 'pot' of funds that you can draw on.

6. Carefully consider your goals. What do you hope to achieve with your property investments? Is it short-term cash flow or long-term appreciation? Understanding your objectives can help guide your investment decisions. Speak to a financial expert who can help you work out the best goals for you.

7. Research the best areas to invest. Consider factors such as regeneration, population growth, job growth, and affordability when evaluating potential markets.

8. Begin with a small investment portfolio and grow from there. Starting small allows you to learn the ropes without risking too much money upfront, especially if this is your first property investment.

9. Consider who your tenants will be. Different types of properties attract different types of tenants. Be sure to choose a property type that aligns with your target market, investment type, location and tenant type/demographic all go hand in hand.

10. Diversification is important. Don’t put all your eggs in one basket. Investing in a mix of property types and geographic locations can help mitigate risk. Like all investments, there is nothing guaranteed, investing in different investment types as well can spread your risk.

11. Consider hiring a property management company. If you’re not comfortable managing your properties yourself, consider outsourcing to a professional management company.

12. Think about an exit strategy. What happens if you need to sell your properties? Having an exit plan in place can help you navigate unexpected changes in the market. An exit plan doesnt have to be to sell, it can also mean to change direction, for example if you are considering a short term corporate let, then look at the long term rental market as well in that area, just as a back-up option.

13. Try to avoid getting a buy-to-let mortgage. These types of mortgages often have high fees and interest rates, making them less favourable than other types of financing options.

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