Types of real estate investments in the UK

The real estate market in the United Kingdom has a variety of investment opportunities, each with their own set of merits and risks. If you are a new property investor or an experienced one, learning about the different types of real estate investments can be beneficial. Knowing your options is key to building a successful real estate portfolio.  

You can also improve your investment techniques and increase your potential for success by allotting your time to studying portfolio diversification. By familiarising yourself with different types of property investments, you can align your strategy with your budget and investment goals. This is true whether you want to generate passive income or seek active involvement in property management. 

To help you with this, Mortgage Introducer has listed several types of real estate investments that property investors can choose from. We will talk about the best type of property to invest in the country. Want to know what the most profitable type of real estate investment is? Read on for more.  

To our usual readers who are real estate agents and mortgage professionals, this article is another one of our client education pieces. You can send this to clients who want to know about the different types of real estate investments in the country. Be sure to share this with them! 

Types of real estate investments in the UK 

From the simplest to the most complex ones, each real estate investment type has unique characteristics. These features can influence returns and management requirements. Learning about these different types can help you identify which investments suit your skills and interests. 

Here are some of them: 

1. Buy to Let properties 
2. residential real estate 
3. commercial spaces 
4. Build to Rent properties 
5. REITs 
6. student accommodation 
7. holiday lets 

We have explored each of these types below: 

1. Buy to Let properties 

Buy to Let properties are bought by real estate investors who aim to earn extra profits from rental yields. If you want to buy one, you can secure a Buy to Let mortgage with a commercial bank or property loan provider. However, you must show proof of intention to generate income from your Buy to Let investments instead of residing in it. 

Here's why you should invest in Buy to Let properties in the country: 

To know the latest changes about the UK’s Buy to Let mortgage rates, bookmark or favourite this guide. 

2. Residential real estate 

Real estate investors who want purchase residential properties aim to accumulate their earnings profit from their tenants’ rental fees. Here are some examples of rental properties for residential purposes: 

• flats 
• maisonettes 
• multi-unit buildings 
• single-family homes 

If you invest in residential properties, you should be prepared to manage it directly as a landlord. 

3. Commercial spaces 

The next type of real estate investment is commercial space. In comparison with flats and buildings for residential purposes, commercial properties usually have longer lease terms. As such, this might offer a more stable income for investors. Rental earnings generated from commercial properties also tend to be higher than rental properties due to the property size and type of tenants (businesses). 

There are many kinds of commercial properties to choose from. You can buy a real estate property and rent it out as: 

• shopping stores 
• office spaces 
• production plants 
• industrial warehouses 
• properties for hospitality (restaurants, bars, and hotels) 

4. Build to Rent properties 

Another type of real estate investment is Build to Rent properties. While this industry is not as big as the Buy to Let property market, it is projected to grow quickly due to developers’ preferences. 

For interested property investors, unfortunately, you cannot purchase Build to Rent properties. From the name itself, this is designed solely for renting purposes. 

So, what are your options if you want to invest in this type of property? You can purchase shares in the following businesses involved in the Build to Rent market: 

• REITs specialising in Build to Rent  
• real estate developers 
• construction companies 
• other financial institutions 

These options will allow you to gain experience without directly owning properties. Such methods will also provide opportunities to benefit from the expanding UK Build to Rent market. 

5. REITs 

Real Estate Investment Trusts (REITs) are public real estate investment companies. They are listed on stock exchanges where traders and investors buy and sell REIT shares. In turn, REITs provide an option to invest in real estate without becoming a direct owner of properties. 

Usually, this property investment type needs to distribute at least 90% of their profits to shareholders as dividends. Check out why REITs are considered good real estate investments in this video: 

For those who are interested in this type of real estate investment, we have compiled a comprehensive list of UK REITs to invest in. 

6. Student accommodation 

Real estate investments like student accommodation are also classified as residential properties but are constructed for specific reasons. These can be flats or residential units which are close to schools such as universities or colleges. They are specifically constructed for students who want to live nearby. 

Investing in student accommodation requires good management since they must be designed to meet the needs of student living.  

Learn all about investing in student accommodation in this article. 

7. Holiday lets 

Holiday lets are properties rented out for short stays, often in tourist locations. During peak season, this type of real estate investment can provide higher income. However, it might require more management and marketing efforts to attract guests. 

Other types of real estate investments: 

• land investment 
• social housing investments  
• real estate crowdfunding 
• green real estate investments 

What is the most profitable type of real estate investment? 

The most profitable type varies by market conditions and location. For instance, Buy to Let and residential properties can provide consistent cash flow. On the contrary, commercial properties cam offer higher returns through longer leases and lower tenant turnover. 

As for REITs and the other types of real estate investments, they can also be profitable options. All in all, the answer to this depends on the internal and external factors as well as the real estate investors themselves. 

Tips in succeeding as a real estate investor 

Here are some tips for succeeding as a real estate investor in the UK: 

1. stay organised 
2. adapt and learn 
3. plan your finances 
4. understand the market 
5. try property management services 

Let’s discuss these tips one by one: 

1. Stay organised 

Managing your finances is important especially if you have invested money in various types of real estate investments. Keeping detailed records of all transactions and communications is also necessary. This is for maintaining clarity in your investment ventures. Even the smallest details should not be left out. To stay organised, use spreadsheets or other tracking software for your expenses and income. 

2. Adapt and learn 

Once you enter the real estate investing market, be prepared to adjust your strategy based on market changes or personal circumstances. For continuous learning, you can try taking real estate investing courses. You can also attend seminars to deepen your knowledge as a property investor and improve your decision-making skills. 

If you prefer learning on your own, you can buy books on investing in real estate from authors with proven track records as investors.  

3. Plan your finances 

Budget for all costs involved in property investment, including the purchase price, renovations, maintenance, and taxes. Explore various financing options, such as mortgages, private investors, or crowdfunding, to find the best fit for your situation. 

4. Understand the market 

Research local areas to be updated with the latest property values and rental yields. Having a more than basic knowledge of market trends and economic indicators is critical when making investment decisions. 

5. Try property management services 

If managing properties becomes overwhelming, think about engaging the services of a property management company. These organisations have the means to handle your day-to-day operations, removing the burden of direct management from your shoulders. 

Navigating different types of real estate investments 

Since there are various kinds of property investments, navigating them can be difficult. This is where real estate experts can help. Other professionals like mortgage brokers and agents can also assist you—especially when buying properties to generate earnings via rental yields. 

Finally, if you have the means, try putting your money in more than one type to diversify your portfolio. Aside from providing you with extra funds, doing this can be an added layer of financial security. All these property investments have the potential for long-term appreciation and can give you a stable source of income. 

Would you invest in any of these types of real estate investments? Why or why not? Tell us what you think in the comments section below.