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Which property types offer the best return on investment?

In the second of two guest pieces for Property Investor Today, Jana Korpova-Harris, director at the Luxury Property Show - which returns to Olympia London on October 31 and November 1 - offers her top tips on identifying which properties offer the best return on investment.

Property has always presented a good investment opportunity. It has created more millionaires and billionaires than any other asset investment option.

This is partly down to the fact that there will always be demand for property. People will always require somewhere to live and almost everyone has the ambition to buy a home at some point during their lives.

Property also differs from other types of assets. Banks lend against property at a high level because it is considered to have a fundamental ‘bricks and mortar’ value that other investment opportunities simply don’t have. In the UK, property increases in value by an average of over 10% per year.

It’s undeniable that investing in real estate offers the potential to create large profits and now is a better time than ever to purchase a home. Today’s cost of debt is incredibly cheap and, with interest rates at the lowest they have been for many years, buying a property is more achievable now than it has ever been.

Which property types offer the best return on investment?

There are lots of ways to benefit from property investment and the best opportunities to maximise ROI depend on how the purchase was funded and whether it has been bought purely for rental income or for a mixture of rental and residential use. However, no matter what a buyer’s situation is, there are certain types of investments which are always likely to offer strong profitability. 

For instance, purchasing land with a fantastic view that might be built on in the future is a great way to maximise the chances of receiving a large profit. This requires savvy buyers to keep an eye on the market and identify land in up-and-coming areas which is likely to be sought-after in the future.

For those who are keen to see a return on their spend more quickly, buying land and building a property to sell on or use as a rental home is also an effective method for maximising income.

If buying land doesn’t appeal, another great way to make an investment work harder is by purchasing a ‘fixer-upper’. Buying a house or an apartment which requires some structural or cosmetic work offers an opportunity to purchase a home below the market value and sell it on for more than the price paid. This can be done in a relatively short space of time, as long as the homeowner has the resources for the renovation.

In fact, homes that require renovation work can typically be purchased at 8% below the market value and the buyer will pay less in property taxes because they are calculated based on the original sale price. Managing the renovation of a property also gives homeowners more creative control over the process, ensuring that the finished home is exactly to their taste.

Another great way to improve the profitability of a property is to invest in multi-unit freehold blocks. This involves converting a building into apartments or buying and renovating an existing apartment block.

This type of property doesn’t come cheap. However, once purchased, landlords can rent out apartments to individual tenants, charging rent for each flat and thus maximising the money made.

Which property types offer the best return on investment?

A study by economist Rob Thomas in 2015 showed that buy-to-let returns over the previous 18 years had beaten those from every other major asset class available, proving that this type of investment offers the best possible chance of making a profit.

Whether it’s a house, an apartment or a whole apartment block, buying a property in an up-and-coming area is a fantastic way to increase the chances of making a large profit. This requires an investor to spend time researching the region where they are interested in purchasing a property, whether this is in the UK or abroad, and looking out for indicators that an area is set to spike in popularity.

New airports, ports and marinas are all signs that an area is up-and-coming. Attending exhibitions, like the Luxury Property Show, where investors have the opportunity to talk to developers and estate agents who have knowledge of building plans, is also a fantastic way to keep abreast of the areas that are set to become trendy in the near future.

The Luxury Property Show will include a range of seminars offering expert advice to attendees on the best investment opportunities available around the world right now. For more information, visit www.theluxurypropertyshow.com.

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