What type of property to invest in?

by Readers Question

2 years ago

What type of property to invest in?

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What type of property to invest in?

I wonder if anyone can share some advice on what type of property to invest in. I’ve been looking at investing in two one-bedroom flats by putting a 25-30% deposit down on both. The other option is to put one, bigger deposit down on a three bedroom family home. The ROI seems to be better for the family home.what property

My plan was to try and find two flats that were slightly below market value in the hopes of remortgaging them again in 6 months time (or there abouts) to get two more flats and build up my portfolio. I’m not sure whether this plan is suited to a 3 bed family home though, as the ones that rent out for the most, giving the highest ROI, are in a very good condition and therefore perhaps it would be more difficult to find a family home below market value and so it may be less likely to go up in value and be remortgage-able as early as two flats would. This might then hinder the speed with which I can grow a portfolio.

Also perhaps getting one family home, rather than two flats is more risky as there will be fewer properties to spread the risk across. Is it also easier to rent out one bed flats than family homes?

I’d prefer to have one property that had an overall higher ROI but I also don’t want to make it more difficult for me to build a portfolio and more difficult to find tenants.

I’d be very grateful to hear anyone’s experience and advice.



Neil Patterson

2 years ago

Hi Martha,

There are many equally valid investing strategies that are affected by the outcome you want and the area you are investing in.

Due Diligence is key as you have not mentioned the actual figures yet to help guide us. I think you will find our property research tool, Landlords calculator and advice page most helpful to get you started.

Please see:



Not that this is the most important factor but in my 20 years in the industry it is usually the lower value properties and particularly flats that take the greatest hit in a down turn as there will always be more demand for houses as they are perceived as more desirable.


2 years ago

Hi Martha-see the previous point re "32 Reasons Why GO's Tax Changes Are Wrong", then invest in something else that doesn't incur tax on turnover instead of profit!

Best of luck,


Many thanks for both your comments.

I've actually had my answer given to me by my mortgage advisor as I was (wrongly) thinking I would be able to borrow a similar amount for a larger house as I would have been able to borrow across two smaller one bed flats. I now know that's not the case so I wouldn't be able to afford the bigger house now anyway!

Thank you for the links Neil. I shall definitely give the ones I've not already read a look. I find the calculators most useful!

Thanks John - I am rather perturbed that this new tax rule will be coming in to play just as I'm getting started in property but I still feel it will be worthwhile in the end! My plan is to start as if the law is already in motion so hopefully I won't get a nasty shock in 2017.

Thanks again both.

Alison King

2 years ago

I think research is the key thing. Make sure you are fully up to speed on all the relevant tax implications of the different operating models (as an individual, company, partnership etc), draw up a financial model that spans several years and factor in risks such as interest rates rising, further changes in tax regulation, possible property crash and have an exit plan.
With flats, make sure you fully understand everything about the lease and any service charges, insurance obligations etc to make sure there are no hidden or uncontrollable costs. One bedroom properties mean you have a very narrow potential tenant population. Make sure the area supports enough of those to minimise voids.
Could the three bedroom family home also be let as an HMO if families are hard to find in your area?
I suggest you spend lots of time on Zoopla, Rightmove etc studying how long similar properties in that area stay untenanted, visit a few as a disguised tenant and consult with local estate agents as well as attending landlord networking events in your area.

Simon Lever

2 years ago

Hi Martha

As you are starting out firstly good luck!

Talk to your mortgage advisor and see if it is eceonomical to borrow the money in a limited company. With the new restrictions on interest for individuals this may be better for you in the long run. Also talk to your accountant about the implications of trading through a limited company.

In general I would advise the two smaller properties as you have more cover to pay the mortgages in a void period. If the family home has a void then you have no income and interest payments to pay which have to be funded from your other income or reserves you have built up.

If you buy below market value and refurbish then you should be able to make good income and also gains on sale. You will need a good builder to help you as well!

michael fickling

2 years ago

In BROAD terms
Dont do it until the tax thing and its effects cystalize.This might take some considerable time to pan out including broader market forces and prices. I suspect you are maybe underestimating its denudation of property as a value investment. For most landlords 75% of total costs are mortgage interest...and only 20 % of this will be "allowed".

Would you buy a business knowing that the greater part of all your costs would be ignored by the tax office ?? AND that youd then be taxed on turnover ??..as if those costs didnt exist ??

Property types question>>>
Flats generally underperform houses in the long term. Despite recent publicity on rising prices of flats.
Flats have building management companies which can be very inefficient and often expensive.
Flats have more neighbours and those neighbours can have greater effects on your investment... also communal areas..adjoining walls parking etc etc. You will be dealing with more third parties.
My advice ....if you must buy flats buy very top end and only then in places were hundreds more cant be built.It doesnt take much space to create a hundred flats...compared to houses ...so they are more vulnerable to price damage by new developments. Cities like Leeds are a classic example. Thirty years ago ..there were very few...now many thousands. Old mills office blocks..stores etc can be flattened or converted and over a few years a hell of a lot of flats built..and thats not good for those already in the market...and their capital growth. There are exceptions but after many years of having both flats and houses these are my own experiences.

Audrey Wright

2 years ago

As you already know there is a growing starvation for accommodation.

On one hand, you have a lot of people grouping into flat shares. That makes housing more affordable for all of them.
Living solo is more expensive, than renting a room and sharing the utilities.

If you're looking to provide housing on the cheaper end, a 3 bedroom home may be a better choice.

However, if you own a family home, you'll probably want to rent it out to a family than a bunch of strangers.

This is not only associated with the security of having long term renters, but also the notion that a family would better preserve the property, compared to 5 broke post-graduates who barely meet ends.

This is of course - me - heavily generalizing things (sorry to all successful post-graduates). There are also many families that will have a very very hard time to afford renting a 3 bedroom house.

One bedroom properties are the bread and butter in my eyes, because they fit the most widest target of tenants. But those also harbour bigger risks of stumbling into bad tenants and getting your investment endangered.

As you stand, looking to grow portfolio, I'd say segmented investments seem more wise and less risky to ME.

My only advice would be to not make hasty decisions 🙂

Best of Luck
Audrey Wright

Thank-you all for your comments, it's much appreciated. I have done a lot of research into the area I'm planning to invest in (Southampton) and although I realise property prices are more expensive in the South, my intention is to invest there whilst I am starting out, as I do know the area rather well, as that's where I'm originally from. I would like to invest further north eventually to take advantage of cheaper property prices but feel it best to invest somewhere I know well whilst starting out.

I had agreed with much of the advice on here (and still do) regarding investing in two smaller properties but was subsequently put off by the high service charges, which I admittedly had not realised could be so high. I have therefore refined my search criteria and hope to find flats that either have a share of the freehold or have low service charges.

Thanks again for all the advice. This is a great property forum!

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