Property Investment Guide

When it comes to investing money, property investments are a popular choice. They can be a good strategy for regular income and potential capital growth, and there are a number of options available depending on your appetite for risk, your need to diversify your portfolio, and how hands-on you want to be throughout the investment period.

We’ve created the ultimate guide to property investment in the UK for beginners and more sophisticated investors looking to diversify their portfolios into property.

Read on to find out what an investment property is, how to start investing in property and what you need to know about buying an investment property or investing in a property development.

In this guide, you'll learn:

• What is property investment
• What is a property investor
• What does a property investor do
• How do property investors make money
• Is property a good investment
• Is property worth investing in
• Capital growth for retirement
• Generate regular income
• Tax benefits
• Accessing your capital
• Demand for new homes
• How much money do you need to invest in property
• Valuation and investment fees
• Tax
• Mortgage and insurance costs
• Property management and legal fees
• Improvements and maintenance
• Understanding risks in property investment
• Property and portfolio diversification
• Getting started in property investment
• Different types of property investment
• Buy to let
• Buy to sell
• Real estate investment trusts
• New builds and off-plan development
• Investing in new build developments
• Location, location, location
• Property investment alternatives
• Acorn Property Invest

What is property investment?

Buying property for investment is the purchase of a property with the aim of making a profit from it. This can be investing in an existing property or investing in property development by funding new-build homes, for example.

Whether your intention is to sell the property for a profit (known as capital growth) or rent it out to tenants to generate a regular income, such as through Buy-To-Let, making the most of your investment is the aim behind putting funds into property.

Property has historically been viewed as a relatively secure way to invest money over the longer term. Today, you aren’t limited to buying and selling individual properties either – new investment approaches, such as providing mezzanine financing to medium- and large-scale residential property developments, have opened up more opportunities for investors.

With the average UK house price increasing over the long term – in 2022, the average house prices in England increased by 10.9% to £315,000 – residential investment properties are a popular option for investors.

There are various ways to invest in property, from buying a house outright to either rent or sell on for a profit to being a part of a bigger investment project over a longer period of time, where you invest in new property developments.

The construction of new homes in the UK is a major industry, with 37,164 houses built between April 2021 and March 2022 and the average new build property price increasing by 10.6% by the end of 2022. The South West of England saw the highest rise up by 14.7%.

Find out why the South West is a prime location to invest in property.

What is a property investor?

A property investor is someone who buys and sells property for a profit. They either own or partly own property or a development with the aim to grow their capital or generate an income.

They may hold onto property for a period of time to generate rental income. Property investors may have a portfolio of properties and may be on the lookout for new opportunities. They may also be experienced in negotiating deals and managing properties or prefer a hands-off approach by investing in larger schemes that are managed by a business, effectively buying a share of a new build scheme.

Anyone can be a property investor – from individual investors who buy a second property to rent out to more sophisticated investors funding new build home schemes with a view to earning a profit once the site is completed and sold.

Some investors choose to invest in property to supplement other income or invest part-time such as by investing a lump sum into one property or project. More sophisticated investors may devote more time and capital to a portfolio of property investment projects as a way to diversify their wider investment portfolio.

There are a variety of options a sophisticated investor may be involved in, from Real Estate Investment Trusts (REIT), where an investor buys shares in a development, to peer-to-peer investing or unique investment opportunities such as Acorn Property Invest.

Whether you’re looking to invest in one project or looking to diversify your portfolio, there’s a lot to consider to ensure you choose the right investment for you.

While UK property has historically seen significant growth, it’s worth remembering that past performance is not a guide to the future. A return on your investment is not guaranteed, your capital may be at risk, and you may get back less than your original investment.

Read our guide on how to get into property investment - developers v investors.

What does a property investor do?

A property investor identifies opportunities to invest in property tailored to their needs, goals and appetite for risk.

An investor may actively find, buy and sell their own properties, buy existing properties to rent to tenants, buy off-plan with a view to selling once the development is built, or invest in development with an investment platform such as Acorn Property Invest.

Property investors can take a hands-on role in the projects they’re invested in, such as becoming a landlord through buy-to-let or buying a property, renovating it and selling it.

Investors can also be hands-off if they want to avoid the hassle of dealing with tenants or project managing a renovation, instead choosing to use a property investment company where they invest a sum that is pooled with other investors to fund larger house-building schemes.

How do property investors make money?

Property investors generally earn a profit on their investment in two ways: income generation and capital growth.

Investing for income

This is where the property is used to generate a regular income, such as rent paid by tenants through Buy-To-Let properties.

If you choose to invest in property through a buy-to-let, any rent charged should cover your costs on the property, such as mortgage repayments and maintenance costs, with an amount left after costs that provides you with an income.

If choosing this option of investing in property, investors should consider maximising their rental yields for the property by doing their research and choosing properties in the right location and choosing the type of property set to provide the highest yield.

Alternative approaches, such as investing for income through Acorn Property Invest, provide a regular interest payment on the amount invested into building a development, resulting in a fixed regular income over a set term.

Investing for capital growth

This is where property is purchased and held for a period, then resold at a profit on the original capital invested.

UK homeowners generally experience capital growth on their home over time. A property purchased for, say, £250,000 and sold a decade later for £500,000 would have enjoyed 100% capital growth on their original investment.

Capital growth can take time, especially where the property remains unchanged, and generally follows the overall house price trends across the UK. Your capital is also locked up in the property for the duration of ownership, and capital growth isn’t realised until it is sold and the capital is released.

Investing in building developments, on the other hand, can see capital growth over a shorter period. This is where funds are pooled from a variety of investors – from banks to individuals – to purchase land and fund the construction of new properties. The completed homes are then sold – usually at a profit – and this profit is shared among investors, who also get their initial capital investment back.

Investing for capital growth or income investment

Acorn Property Invest offers two routes for investors with an investment vehicle for a fixed quarterly income on your investment or an investment vehicle that aims to grow capital at the end of the term.

Find out more about investment opportunities with Acorn Property Invest.

Profit share and return on your investment are not guaranteed, your capital may be at risk, and you may get back less than your original investment.

Is property a good investment?

There is no simple answer to the question of whether or not property is a good investment. It depends on a variety of factors, including market conditions, your personal financial situation, and your investment goals.

In general, however, property can be a good investment if you are able to buy it at a low price and sell it at a later date for a higher price. If you are looking for a long-term investment, property can also provide you with a steady stream of income through rental payments.

Of course, there are also risks associated with investing in property. The value of your investment can go down as well as up, and you may find yourself saddled with a mortgage if you are unable to sell the property when you need to.

Before making any decisions, it is important to do your research and speak to an independent financial advisor (IFA) to make sure that investing in property is the right choice for you. You can use the government's Financial Services Register to find an IFA.

Property investment can certainly be a sound investment strategy as part of a wider investment portfolio, but it’s important to weigh up if it is the right option for you. It’s a good idea to research all aspects of property investment and think about what it is you are looking to achieve and your appetite to risk.

Investment goals

It may be good to consider what you want your investment to achieve, such as:

• Providing a regular income
• Growing capital over the long term, such as part of a retirement strategy
• Diversifying your investments, so you have a mix of different types
• Investing over the long term, such as for university fees or wedding costs
• Making a lump sum work harder and aiming to beat inflation from eroding its value

Appetite to risk

All investment has a degree of risk, and you'll need to consider what your tolerance to risk is:

• How important protecting your capital is
• Your level of concern about potential losses against potential gains
• Your appetite for higher rates of growth at a greater risk to capital
• When you expect to access any gains, such as over the short or long term
• How long you are prepared to lock in your capital
• How would your finances cope if you investment resulted in a loss

Is property worth investing in?

The UK housing market has historically proven a stable investment for growth and has seen significant price rises in previous decades, making it an attractive proposition for investors.

For example, if you’d invested £5,158 in 1972 – the price of an average UK property back then – it would have been worth around £278,436 in 2022. Over the past 50 years, house prices have increased by around 9.3% per year, according to research.

Some areas – such as the South West – have seen above-average growth, with annual rates of growth averaging 10.7% per year since 1972.

Property investment has the potential to offer investors benefits such as capital growth, regular income and tax efficiencies, which are just some of the reasons to consider investing in the property market.

Capital growth for retirement

Investing in property is one way to grow and save money for your retirement. If you own your own house or invest in a second property or choose to work with a company, there’s potential to grow your investment over years with a chance to earn yourself a nest egg for your retirement.

Generate regular income

Investors looking to receive a regular income from their investment often choose property to achieve this. Traditional property investment options such as buy-to-let offer a regular income through rent, but choosing to partner with Acorn Property Invest can also offer a regular income option.

Find out more about how it works investing with Acorn Property Invest.

Tax benefits

Property investment platforms may offer investment opportunities that are subject to tax relief, and that can allow investors to receive tax relief depending on their investment vehicle, such as receiving tax relief on dividends. Peer-to-peer investment is an example where you are not subject to tax on unpaid loans, for example. There may also be the chance to earn tax relief for investors who are paid a dividend from their investment.

Find out more about tax on dividends and learn more about capital gains tax allowances.

Access your capital

Traditional property investment options can mean your capital is tied up for a number of years before you see a return on your investment (ROI), whereas some property investment options can potentially offer investors a much shorter term to see capital growth. For example, Acorn’s Capital Growth investment option can see an ROI in as little as one year.

Profit share and return on your investment are not guaranteed, your capital may be at risk, and you may get back less than your original investment.

Demand for new homes

By the third quarter of 2022, around 40,210 new homes were built in England, with 45,590 new build developments underway. The demand for new homes may make investing in upcoming developments an attractive proposition to investors, with a market of home purchases available to buy new build developments.

Assess if it is right for you

The earning potential in property investment can be alluring to investors, but like any investment, it’s important to weigh up all sides, including possible risks, to ensure you are aware of the full picture before making the commitment to invest.

Before you look into potential investment opportunities, be sure to do a full health check of your own finances, as investing in property can tie up large sums of your money. Work out your income and outgoings for an average month to see how much you can afford tied up in an investment.

Taking the time to assess all possible outcomes and planning your investment strategy can help to mitigate risks.

Factors to consider when planning if property investment is right for you:

• Research options for long-term potential and assess the level of risk involved.
• Explore locations with high growth, such as why the South West is a prime location for property investment.
• Keep up to date with the current property market to identify any changes that could impact your investment.
• Speak to an independent financial advisor to get expert advice that is relevant to your personal circumstances.

How much money do you need to invest in property?

The answer depends on what type of property investment you choose.

If you are considering a traditional route into property investment, such as buy-to-let or buy-to-sell, there are a number of expenses to be aware of. Investing in a new build development, on the other hand, means you can choose your investment amount without additional outlay.

Read our guide on how to invest a lump sum.

Additional costs related to personally investing in a specific property, whether buy-to-let or buy-to-sell, include:

Valuation and inspection fees

It’s common to instruct a building inspection on a property once you have an offer on a property accepted. This is recommended as a full inspection allows you to have full visibility of the current state of the property and any areas of concern that you will need to be aware of. Plus, if you are taking a mortgage on the property, a mortgage lender may ask for this.

Tax

Tax implications are a consideration when investing in property, as you will be liable for Stamp Duty Land Tax, Income Tax and Capital Gains Tax. Income tax is calculated on the rental income you may make on the property, while capital gains are subject to any profit you make when selling the property if it is not your main home.

Mortgage and insurance costs

If you are taking a buy-to-let mortgage, you will have the monthly payment to meet, plus you will need to raise about 20-25% of the property purchase price for your deposit. If you are a landlord, it’s advisable to take out landlord insurance which will include an additional monthly payment or can be paid annually. The government has a helpful guide on working out rental income when you let a property.

Property management and legal fees

Investors often need the legal support of a solicitor to find their way through the legal aspects of investing, which will mean you have legal fees to cover. Similarly, once you’ve bought a property to rent out, you may choose to employ a property management company to manage the day-to-day running of the letting, which will incur monthly costs.

Property improvements

Particularly for house flipping and buy-to-let investments, you will need to allow cash for renovating the property to certain standards; in the case of buy-to-let, you will need to ensure your property meets the government landlord's responsibilities, so you will need funds to improve the property before it can be rented out. Having a safety net to cover your costs should your property sit empty for several months is also advisable.

Understanding risks in property investment

Investing in property comes with risks to consider before you embark on the journey.

It’s important to be aware that whatever the amount of money you invest in property is likely to be tied up for some time, so you need to ensure you can financially manage while your capital is tied up.

As much as a property is seen as a stable investment choice due to property price rises in the UK market, it’s essential to consider market fluctuations that could affect your investment’s value.

There are additional risks to consider with buy-to-let, as there is always the risk your property may have periods when there are no tenants, and you will still have the costs associated with the property to meet without the income of rent.

Before entering into property investment, you should assess your risk tolerance to ensure you choose the right investment for you. Working out your appetite for risk will help identify the right investment opportunity to embark on.

If you are prepared to risk potentially losing a significant amount of money with the aim of potentially earning a high ROI, your risk appetite is considered high. If you are not willing to potentially lose a large amount of money, you are more suited to choosing an investment of lower risk but may not receive as high ROI as high-risk investors.

Always speak to an IFA before making an investment.

Property and portfolio diversification

Diversifying your portfolio is a way to spread out your investment capital in different opportunities, reducing the risk of all your capital being tied up in one investment and can help protect your investment.

Sophisticated investors often invest in various properties, from residential to commercial properties such as retail and offices to industrial properties such as warehouses.

Working with an investment business such as Acorn Property Invest allows you to diversify your portfolio by offering investors the opportunity to invest in a selection of upcoming developments.

Find out more about investing with Acorn Property Invest.

Getting started in property investment

More people are getting into property investment through various options available, from buying properties to rent out, selling properties as a small developer, to investing in new build developments.

Every investment option has pros and cons and an element of risk, so it’s important to consider all factors before choosing the investment option for you, regardless of whether you are a sophisticated investor or just starting out on the property investment ladder.

Research is key before committing to a property investment project. It’s important to remember that valuations on a property can vary with different agents, and if you are investing in property, the market can fluctuate, so you will need to keep up to speed with current trends such as housing demand and the impact of the cost of living.

Do your homework on the project you are investing in to be sure you are clear on the level of risk you will be taking and understand the returns you will be hoping for from the full term of the investment.

Researching all aspects will help you choose the property investment that best suits your requirements.

Different types of property investments

There are several options for property investors, from traditional routes such as Buy-To-Let to newer forms of investing such as Real Estate Investment Trusts (REITs), as well as investing in properties developers such as Acorn Property Group, who specialise in stunning, sustainable new build developments of bespoke, design-led building projects.

Buy-To-Let

Buying properties with the sole purpose of renting them out to tenants for a regular income is a traditional approach to property investment and one that many people are familiar with. Research by uSwitch found that there are around 2.74m landlords in the UK – mostly aged 55 years and above – and each landlord owns an average of eight properties.

Things to consider for buy-to-let investors include:

Pros

• House price growth - with the likelihood of house prices increasing, in the years you own the property, you may well find the property increases in value and see you make capital gains when you sell. Capital Gains Tax is an important consideration when selling a property for a profit, with lower taxpayers liable for 15% while higher rate taxpayers will face 28% tax on the profit of the sale.
• Regular income - renting the property out can give you a regular monthly income that is likely to cover any mortgage payment you may have on the property as well as a maintenance fund for the property and still give you a profit at the end of the month.
• Expenses offset against tax - repair and maintenance costs as well as rental advertising costs, are just some of the costs with buy-to-let investments that you can offset against the amount of tax you pay.

Cons

• Stamp duty - you may be liable for extra Stamp Duty Land Tax (SDLT) if your property value is over a set threshold. Visit the government to understand SDLT thresholds.
• Costs for empty property - if your property is empty, you will still be liable for any bills, including council tax and maintenance costs. Your mortgage will still need to be paid every month, even if you have no tenants in the property.
• Tenants - finding the right tenants, checking references, and deposits all take time and money. You can have your property managed by an agency, but this will add to your costs. It’s also important to remember that any damage to the property made by tenants will be your responsibility to put right before the property can be rented out again.

Read our guide to understanding if Buy-To-Let is worth it.

Buy to sell

Buy to sell – known as house flipping – is buying property with the aim of selling on for a profit. Quite often, the property will require refurbishment, allowing the investor to buy the property at a lower price, do the work and sell it for a higher price when completed.

Pros

• Quick ROI – with house flipping, the property is often refurbished, bringing the standard of the property up in a short period of time, meaning you can see a return on your investment quite quickly.

Cons

• Time-consuming – in order to do the necessary work to bring the property up to spec to sell for a profit, there is a lot of work involved and can take a lot of your time to do the work yourself if you have the skills, or can be costly and need project managing should you outsource the work to tradespeople, but either way, the project will be time-consuming to keep it on track to turn it around relatively quickly for sale.
• Stamp duty – as with Buy-To-Let properties, you will also be liable for Stamp Duty Land Tax (SDLT) over a specific threshold when house flipping. Check out SDLT thresholds on the government website.

Real Estate Investment Trusts (REITs)

REITs are investment trusts that own, manage and finance income-producing real estate. REITs trade on big stock exchanges and buy and sell like any other stock.

Pros

• Regular income – REIT shareholders may receive dividends from the income generated from rent and growth from capital pooled into the property assets.

Cons

• Risks – as with all investments, there are some risks, such as fees charged by the REIT and other expenses, which can eat into your returns. You have no control over where your money is invested with REITs and are reliant for performance on the company that owns, runs or finances the properties.
• Tax – you may be liable to pay tax on any dividends paid.

New builds and off-plan developments

Investing in an off-plan development or new development proposition is another way to invest in property where you’re investing to fund the overall project, such as investing in new homes built by Acorn Property Group, or by purchasing individual properties yourself.

Pros

• Capital growth – when buying off-plan properties, they can often be purchased at a discount. The market value is likely to increase by the time the development completes, meaning investors can achieve capital appreciation on their investment.
• Sustainable – as new build and off-plan properties are built in line with the latest environmental standards, these properties tend to be cheaper to run than older properties that haven’t been built to be environmentally friendly and energy efficient.
• Rewarding – you're effectively investing in new home building, helping create new communities and providing homes for families.

Cons

• Lack of control - if you are investing in off-plan or new builds, you may not be in control of the build schedule and meeting deadlines, which can be frustrating if the build falls behind schedule.

Read our guide on alternative property investments.

Location, location, location

One of the key considerations when investing in property is the location of your property. This is just as important whether you are looking to invest in a buy-to-let property or you are looking to invest in a new build development.

Here are some of the fundamental considerations to research when choosing the location of your potential property investment.

Is it a desirable location for tenants or future residents?

A good location to live is top of many people’s lists when it comes to renting or buying, so think about how the area you are thinking of investing in meets the criteria, including:

• nearby/walkable amenities.
• transport links.
• job opportunities.
• school catchment areas.

The requirements of tenants will naturally depend on the demographic your property is targeting. For example, families with young children will be more attracted by school catchment areas, while an older person may be more interested in nearby amenities.

Rental yields

If you are looking to rent out your property, doing your homework on the average rental yields of your chosen location and similar properties in the area is an important part of your decision-making. Choosing an area with high rental yields, such as areas with high student populations, will maximise your potential ROI.

Property prices

If the aim of your investment is to sell the property, whether when the development completes or when you have done improvements to it, you need to get a good idea of the current property prices in that area.

Take the time to become familiar with property price fluctuations over previous years while learning about forecasts for property prices in the area. Ideally, you want to find a balance between an affordable property with the potential for price increases. Look out for news about wider community investments, such as investment in new transportation links.

Future plans for the area

Look into what plans there are for the area you’re looking to invest in. For example, are there plans for new shopping facilities? Redevelopment plans of rundown areas? All these considerations can help you determine if the location is and has the potential to be a lucrative area for property investment.

Why the South West is a prime location for property investment

Wiltshire, Gloucestershire, Somerset, Bristol, Dorset and Cornwall make up the South West of England which is the largest region in the UK and an up-and-coming area for property investors.

Acorn Property Group has already built 40 completed developments in the area and is continuing to build new developments across the South West.

Find out more about upcoming opportunities in the South West with Acorn Property Invest.

Here are some of the reasons why investing in the South West is worth considering for property investors.

Property price increases

Forecasts for house price growth in the South West over the next five years is 13.1%, with coastal areas showing the fastest increase. Rightmove’s most searched-for destination in the UK in 2021 was the stunning coastal county of Cornwall which was closely followed by Bristol and Devon, all located in the South West.

Continually improving transport links

Including three international airports, fast trains into London, and continued investment in Cornish railways, the South West has easier access than ever to the rest of the UK and beyond, increasing its appeal to live in.

Stable and diverse

The UK’s first choice for second homes, the South West is the location of choice for many families, house owners looking to downsize, and retirees along with local buyers and private landlords, making the area a stable and diverse choice for property investors.

Population growth

Growing by around 7%, the South West is set for the second-highest growth in the population of any English region in the ten years to 2028, and the area had the fastest growing population than the UK as a whole between 2003 and 2008, showing the increasing demand for property in the area.

Discover more reasons why the South West is a top location for property investors.

Property investment opportunities – the Acorn alternative

Acorn Property Invest gives property investors a unique alternative to get involved in property investment.

Depending on the type of investor you are, Acorn offers two options to suit your needs. If a site-specific investment opportunity interests you, Acorn’s capital growth profit share option with the aim to generate a positive return on investment at the end of the term may be worth considering.

For investors preferring regular income from their investment, spreading your investment capital across Acorn’s portfolio and receiving a quarterly fixed rate of income may be the right choice for you.

Why consider an alternative property investment with Acorn?

Acorn Property Invest was launched in 2019 and is the fundraising arm of Acorn Property Group, which is one of the UK’s leading medium-sized housebuilders. Acorn Property Invest introduces investors to the options available to be part of Acorn Property Group’s upcoming property developments.

For investors wanting the chance to diversify their portfolio and explore the UK’s vibrant property market, Acorn Property Invest offers investors this chance. We offer the certainty of a fixed-term investment, with either regular fixed-income payments or capital growth through fixed returns and profit share.

Profit share and return on your investment are not guaranteed, your capital may be at risk, and you may get back less than your original investment.

Acorn Property Group's stunning developments

Specialising in residential-led refurbishment and new-build developments in the South West, Acorn Property Group’s ethos is to create bespoke, design-led build projects that enhance the surrounding environment while meeting the needs of the local community.

Acorn Property Group has extensive expertise in the region to identify sites to develop sensitively while considering sustainability and seeing a long-term view.

Repurposing existing buildings, such as listed buildings and brownfield sites, is a big part of Acorn’s proposition. More than 125 projects have been completed since 1995, and Acorn plans to build more than 2,200 homes with a combined value of over £1.2bn over the next three to five years.

Find out more about investment opportunities with Acorn Property Invest.

Your capital is at risk if you invest

Investment opportunities available via Acorn Property Invest are exclusively targeted at exempt investors who are experienced, knowledgeable and sophisticated enough to sufficiently understand the risks involved, and who are able to make their own decisions about the suitability of those investment opportunities.

All investors should seek an independent professional investment and tax advice before deciding to invest. Any historic performance of investment opportunities is NOT a guide or guarantee for future performance and any projections of future performance are not guaranteed.

All investment opportunities available via Acorn Property Invest are NOT regulated by the Financial Conduct Authority (FCA) and you will NOT have access to Financial Services Compensation Scheme (FSCS) and may not have access to the Financial Ombudsman Service (FOS).