Best Way To Make Money From Property Uk

Chances are you'll know what's a fair price in your area and where the best up and coming places are in which to invest in property – with a bit of help from Zoopla when needed.

So far so good, but what's the best way to put your knowledge to use in a way that will make you some money?

In essence, it boils down to three options:

Buy and rent out

You could snap up a property and then make a regular, monthly, income by renting it out to a tenant. There are said to be two million landlords renting out about five million properties across the UK, so this is a popular way of investing in property. Many of the most serious investors will have a portfolio of a number of properties.

You need to find a location with a good yield. This is the amount of rent you can expect to earn in a year expressed as a percentage of the property price. So, £8,000 a year on a £130,000 house would be a 6.15 per cent yield but £7,500 a year on a £125,000 house is a 6.25 per cent yield – showing that the cheaper house gives a better, pound for pound return.

Areas where there is a need for short term accommodation – such as those near to universities – might well deliver the best yield.

You'll need to bear in mind that the money you make in rent counts as income and you will need to pay tax.

Buy up, do up, sell up

Alternatively, you could take a different approach. If you've got an eye for a bargain you could search out properties that you could sell on for a decent profit. Often this means taking on a renovation project but if you've got an eye for DIY – or a good contacts book of trusty traders – then you might find this a lucrative way of investing and making a tidy profit without the need to ever deal with a tricky tenant.

You will need to pay Capital Gains Tax on any profits you make during the sale.

Indirect investment

If neither of those options appeal, then there is a way of investing money in the property market without having to purchase a single brick for yourself.

You can instead choose to invest in a fund that goes on to invest in the market for you. This might sound a little daunting but it's still an investment in an asset that you're comfortable with and might be worth exploring if you fancy a less 'hands on' investment.

Some of these, as this guide states, have special tax arrangements to be aware of.

Real estate investment trusts (REITs) are split between a corporation tax-exempt letting business and a property management service. Profits on the latter are treated like any other investment but the former carries the same tax status as property income.

Property Authorised Investment Funds (PAIFs), meanwhile, are a different kind of investment vehicle that also carry similar tax breaks.

Over and above this there are other forms of fund that don't fit into either category. It's well worth checking to see if they are regulated by the Financial Conduct Authority (FCA) before you make any decision to part with your cash.