Investing in property in any country requires balancing risk with reward.
And the same process of weighing up options applies to renting out commercial or residential property in the UK.
But the market can fluctuate considerably and recent changes to the law mean that your money might be better spent on one kind of property portfolio than another.
With that in mind, here are some pros and cons of three UK property sectors for landlords.
Buying residential properties to let them to tenants has long been a profitable side-line for many individuals and a main income for others.
But building society Nationwide has been hit by a buy-to-let crackdown causing its lending fall by 31 per cent between April and June this year.
A combination of increased stamp duty on additional properties, changes to tax relief on purchasing additional properties and falling rents has reduced profits for landlords — making this market far less attractive than previously.
It’s hard to predict the long-term viability of the buy-to-let market — but it’s probably not the most attractive proposition right now.
Market insiders predicted that the unfolding Brexit saga may cause a slump in the commercial property market.
But in London, commercial real estate has remained relatively buoyant.
In the first half of 2017, Hong Kong and Chinese investors injected £4billion into London commercial properties — pushing to total investment in the City in the period to £12 billion.
Hong Kong condiments group Lee Kum Lee purchased the iconic ‘walkie talkie’ building for £1.3 billion and the ‘cheesegrater’ skyscraper was bought by Hong Kong-based CC Land for £1.15 billion.
US serviced office provider WeWork has leased 24 London sites in the past three years, while The Office Group has expanded in the same niche.
But office rents are falling outside of the high-end market — so if you’re looking to make money it’s likely to require an extremely high level of initial outlay.
Commercial rental markets outside of London have their own economic climates, but there are opportunities to be found — provided that you conduct thorough research.
Semi-commercial properties could include a large mixed-use building or complexes with residential and commercial properties under the same roof — or a simple flat above a shop.
And semi-commercial properties are exempt from buy-to-let tax changes that are hobbling the market.
These types of properties are subject to commercial rather than residential stamp duty, so buyers spend less on tax.
They’re also exempt from the mortgage tax relief charges imposed on residential properties in April 2017 and business tenants usually sign longer-term leases than commercial renters — making longer-term investment returns more likely.
So investing in a semi-commercial property might be your best bet since it may offer slightly more stability than a purely commercial portfolio and more profitability than buy-to-let.
Follow the pros and cons of these three UK property sectors in order to invest your cash wisely.
Which UK property sector would you invest in at the moment? Share your advice in the comments section.