Your guide to UK property investment strategies

When taking your first steps into property investment, you need a strategy.  

You should start by assessing the basics. How much capital do you have? What are your goals for investing? And how hands-on do you want to be? 

Once you’ve decided on these fundamentals, you can start considering the sector you want to invest in and your strategy. There’s a range of different types of sectors for smaller investors, ranging from buy-to-let through to short-term holiday letting and below-market-value properties. 

The UK property market is changing, though, due to both the introduction of the Renters’ Rights Act and tax increases. That means many property investors are looking at more complicated or even opportunistic strategies to earn extra returns. These can include houses in multiple occupation (HMOs), which can be rented by the room, or below-market-value properties that are bought inexpensively and refurbished. 

As a property investor, you may prefer to adopt a long-term buy-and-hold strategy or shorter-term opportunistic strategy. This article explains your options. 

Why invest in property?

Like any business, the purpose of investing in property is to make a profit. In any property investment your potential investment return comes from rental income, any gains on the capital you’ve invested, or a combination of the two. 

In the case of buy-to-let investing, your tenants pay rents monthly. The average gross buy-to-let rental yield in the UK is 5.8%, according to Zoopla.1 However, this is a broad average – in fact rental yields vary considerably depending on the region, type of property and the property’s specific circumstances. 

Over the years, many landlords have earned substantial returns from the capital gains on their buy-to-let properties. For instance, the average UK house price rose by approximately 40% over the 10 years to March 2026, according to the Land Registry’s UK House Price Index. Past performance is not a reliable indicator of future returns as property values can fall as well as rise, and rental income is not guaranteed. 

Beyond these basic points about buying property, remember property investing can be opportunistic and entrepreneurial. Shifting demand and supply constantly creates opportunities for expert investors who understand the market. 

Is property still a good investment?

Property investment can suit some investors, but as with any asset class it carries risks as well as potential rewards. Whether it is appropriate will depend on your individual circumstances, goals and risk appetite. 

The heyday of buy-to-let investing was during the 1990s and 2000s when the sector thrived on rapid capital appreciation and high loan-to-value mortgages. Even in the 2010s ultra-low interest rates meant there was a clear margin between mortgage borrowing costs and rental yields. 

In recent years though, the market has become more difficult. Higher house prices have reduced gross yields on buy-to-let property, although at a UK average of 5.8% according to Zoopla they remain higher than bank deposit rates at the time of writing. At the same time, house prices aren’t rising across much of the country, with prices in parts of central London actually falling in early 2026. Then there is the Renters’ Rights Act, which introduces new rules and regulations. (NRLA members can find more information about the act here.) 

Note that the average UK yield no longer meets the 7% rule, which is a rule of thumb suggesting the annual gross income should be at least 7% of the total purchase price. But yields however vary across the 30 million dwellings in the UK, spread across its four nations. That means opportunities remain, especially for experienced investors. 

Different areas of the country offer higher yields on buy-to-let property. For instance, the North of England and Scotland typically pay a higher yield than the South East and London. 

Similarly, you may want to consider specialist areas of the property market to boost your yield. Broadly speaking, HMOs offer higher yields than standard buy-to-lets. However, they can be labour intensive because you let out individual rooms rather than a whole house. 

You might also want to investigate buying commercial property to earn a higher yield. Or you could invest in a property that needs refurbishing at below market price if you’re prepared to organise building work or even do some yourself. 

In summary, whilst the environment may have changed, opportunities remain. 

How to create a property investment strategy

When setting out to invest in property, you must decide on your goals. Are you primarily looking for an income? Are you investing mainly to build your capital? Or are you looking for a balance of the two? 

Some investors seeking long-term income choose traditional buy-to-lets for their relative simplicity compared to other types of property investment, though all involve ongoing responsibilities. These long-term investments are the most straightforward, although you must still manage tenants, maintenance and administration well, facing significant fines if you get things wrong. 

If you’re setting out to build a professional property business, you may want to focus on specialist, higher return types of investment such as HMOs or refurbishments. Or you can look for opportunities such as under-valued pockets of the market.  

There’s also the issue of your appetite for risk. Higher levels of borrowing increase both potential returns and potential losses and affect your exposure to interest rate changes. A mortgage broker can help you understand what borrowing level is appropriate for your circumstances. But if you’re older and want a relatively safe investment, you’ll want to minimise borrowing. 

Once you’ve decided on your objectives, you can set about creating your investment strategy and deciding what type of property to invest in. 

The different types of property investment

Depending on how you categorise them, there are six property investment sectors that are relevant to private landlord members of the NRLA. While most small investors focus on one or another, larger investors may end up with property portfolios straddling several. 

In fact, having several property investments across a range of sectors spreads your risk. Not only are you less exposed to a single tenant moving out but you’re also more protected against a fall in demand for a particular type of property, which can happen for a variety of reasons. 

Lastly, it pays to be flexible if you’re looking for undervalued opportunities. You may come across a compelling investment opportunity in a sector that’s outside your primary focus.  

Traditional buy-to-let

Buy-to-let investing involves buying a property, often with a mortgage, and letting it to tenants. This form of property investing took off following the introduction of buy-to-let mortgages in 1996. Fuelled by the 1988 Housing Act’s assured shorthold tenancy becoming the default tenancy in 1997, low interest rates and rising property prices, buy-to-let investing boomed.  

When judging the income return on a buy-to-let, you should consider the rental yield. It’s a common yardstick for assessing an investment’s level of income as a proportion of capital value. For instance, if a house is worth £100,000 and its rent adds up to £6,000 a year, then the rental yield is 6%. 

Various property portals and estate agents monitor buy-to-let yields. They generally find that areas such as the North East and Scotland have the highest gross yields on average, while London and the South East pay the lowest yields. The Zoopla property portal found the average gross rental yield was 7.9% in the North East and 7.6% in Scotland (as at September 2025). Meanwhile, gross yields were 5.5% and 5.1%, respectively, in the South East and London.  

When forming a strategy for buy-to-let, balance your priorities. Decide whether you want to invest close to home for convenience or further afield if that achieves a higher yield. If you invest further afield, though, you may need a local agent to manage the property, which will cost money. 

Houses in multiple occupation

HMOs have become popular in recent years because they generally generate a higher income yield. A property is considered an HMO if it has three or more tenants not from the same family. 

According to recent data from Property Reporter, the average gross yield on HMOs is 8%.  

Large HMOs (with five or more people from two or more households) must hold a licence and some councils require one for smaller HMOs, too, charging a fee for the licence and requiring properties meet certain standards in terms of room sizes and fire safety. 

When forming a strategy for HMOs, you should research the demand for HMO rooms in the area you’re considering and the achievable rents. You might even want to set a strategy based on attracting a specific type of tenant. 

NRLA members can read our guide here. 

Holiday lets and short-term letting

Short-term letting through the sharing economy has boomed over the last 15 years. Some short-term lets generate higher yields than traditional buy-to-lets, though this depends heavily on location, occupancy rates and operating costs. 

There’s strong demand for short-term lets. In the 12 months from July 2023 to June 2024, the number of nights let in the UK rose by 10.2%, according to the Office for National Statistics. Westminster, Cornwall, Edinburgh and the Scottish Highlands were the most popular destinations.  

However, your strategy must consider the chance that the market is becoming saturated in some areas. You must be sure your accommodation will stand out in a crowded market.  

You also need to be aware of any local restrictions on short-term lets. London, for example, limits short-terms lets to no more than 90 days per calendar year if you don’t have planning permission. 

Also, remember this business can be seasonal. Summer holiday destinations like Cornwall have fewer bookings in winter but urban hotspots like Westminster are more stable all year round. 

Student accommodation

Student accommodation is a popular landlord sector due to its relatively high-income yields. However, you should research the sector thoroughly as some UK students are choosing to live at home rather than pay rent. What’s more, alongside significant changes to student lets as a result of the Renters’ Rights Act from May 2026 onwards, some universities are struggling financially which may lead to drops in student numbers. 

For the 2025/26 academic year, rents for student accommodation increased by an average of 2%, according to Knight Frank’s Student Property Rental Index. This is far less than a peak annual increase of 8.3%, suggesting that rents may now just be moving in line with inflation.  

When setting your strategy for investing in student letting, you should thoroughly research the local university or college’s prospects, as well as whether students can live at home. 

Below-market-value properties

If you aim to be an opportunistic property investor, you may look to buy at below market value. Properties sell at low valuations for several reasons – for example, the seller wants a quick sale, or the property is in poor repair. Sometimes you might judge that a property’s price is temporarily depressed due to short-term shifts in buyer demand. 

Setting a strategy to buy below-market-value properties often involves specialising in a particular type, such as refurbishments. It’s a good idea to form close relationships with estate agents who can tell you when an opportunity emerges. 

Mixed-use properties

Some landlords have started to buy mixed-use properties. These typically have a shop on the ground floor and residential flats on the upper floors. 

Mixed-use properties combine retail and residential income streams, each with their own risk and return characteristics. Understanding the commercial property market is important before investing. 

Such properties are subject to different stamp duty treatment from purely residential purchases. A qualified tax adviser can explain the implications for your situation. 

If investing in this type of property, you should research the market and form your strategy accordingly. You may want to look at property auction sites that usually have these types of properties. 

How to take your first step towards your property investment strategy

Before you start looking at properties, consider the fundamentals. How much capital have you got? How much risk are you prepared to take? And, how hands on do you want to be? 

You should understand how much you can borrow as well as the implications of borrowing. Speak to a mortgage broker specialising in lending to investors. Ask how much you can borrow as well as what it will cost every month. Stress test how much your monthly payments will go up if interest rates rise. You can choose from various types of mortgages: for instance, a repayment mortgage repays your loan over time, while an interest-only mortgage is cheaper, but the size of your mortgage remains the same. 

You should account for all up-front costs, such as stamp duty, legal fees, survey costs, refurbishment and a reserve for ongoing maintenance. 

Once you have decided on your appetite for risk, understood your finances and established how hands-on you’re prepared to be, you can decide on your strategy. You have a variety of options associated with each property type. 

• For buy-to-let, you may want to simply buy and hold. However, you may decide to build a portfolio and do some refurbishment, releasing capital by remortgaging as you go. 

• Student accommodation, is similar but requires more specialist knowledge. When researching your strategy, you should look for university towns with robust and sustainable demand. 

• HMOs have higher yields but are more complex, due to multiple tenants and regulation. You may want to target a particular type of tenant and should consider any licence fees and other regulations. For instance, are the bedrooms big enough to be let under regulations and will you have to make alterations to comply with fire safety regulations? 

• Turning to short-term lets and holiday lets, some landlords achieve relatively high yields, but the number of these properties has soared in recent years. Your strategy should consider visitor demand and how your property will stand out against the competition. 

• If you’re looking to invest in below-market-value properties, you can make higher short-term returns, but you’ll need to be very hands on. Target properties that match your capital and access to funding. 

• Lastly, mixed-use properties have advantages in terms of potential yields, but you need an understanding of commercial property, which brings a whole new set of opportunities and risks. 

You must also decide whether to hold your property personally or through a limited company structure. The right approach depends on your individual tax position so seek advice from a qualified accountant. 

Above all, you should run the numbers thoroughly. Gross yield is one metric used by investors to assess income return, though what constitutes an adequate yield depends on individual costs, financing and objectives. A financial adviser can help you assess viability. 

Property investment strategy FAQs

What is the 70-20-10 investment strategy?

The 70-20-10 approach is one framework some people use to structure personal finances, though individual circumstances vary considerably. 

It works by splitting your take-home pay into categories. 70% will go towards your living expenses, 20% will go towards savings or investments, while 10% helps towards any debt repayments. If you’re trying to build up some capital to start investing in property, or looking for property investment strategies for beginners, this is often a good place to start.  

What recent tax changes impact property investment?

A variety of tax changes are leading to higher taxes on property investment. 

From April 2027, property income taxes will rise by 2% across all income tax bands, taking them to 22% (basic), 42% (higher) and 47% (additional rate). Tax rates and rules are subject to change. Consult a qualified accountant for advice relevant to your circumstances. 

In April 2025, the furnished holiday letting tax regime was abolished. This changed the extent to which mortgage interest payments could be deducted from rental income for tax purposes. You should ask your accountant for details. 

In terms of record keeping, the new Making Tax Digital regime was introduced in April 2026. All sole traders and landlords with income of over £50,000 must maintain digital records and send them to HMRC quarterly. 

These changes don’t apply to properties held in limited companies. 

Where are the best places to invest in property?

It’s up to you to judge where’s best for property investment. 

Northern cities like Leeds and Manchester consistently perform well in terms of rental yield. Cities in the Southeast have historically provided strong capital gains but this has slowed in recent years. Rental yields and capital growth patterns have historically varied across regions. Thorough local research is essential before committing to any location. 

You can take a deep dive into our guide, ‘Where to invest in property’.  

What are the best property types to invest in?

The best type of property for you to invest in depends on your personal circumstances and goals. How much capital do you have? Are you seeking long-term income from a buy-and-hold investment or shorter-term capital gains from a refurbishment?  

There’s no right answer. Everything depends on you and your strategy.