Starting your property investment journey

In a recent webinar, I shared my thoughts and advice to those people who may be starting out in property investment or have one or two properties currently but are looking to expand their portfolio.

For those people starting their property investment journey, its important to consider why you are looking at investing in property, if now is the best time and how to approach every property investment

Starting your property investment journey

In this blog, I cover some of the key points from the webinar if you are a first-time property investor or looking to expand your portfolio in the UK property market.

Why consider property investment?

The first question for any property investment is Why am I investing in property? Many people invest in property to protect their capital, invest their money safely or earn regular income. However, you may have very clear financial reasons such as wanting capital growth, you may want to create regular income from buy to let investment, or you may want retirement income. Some people are looking at property investment as a full time business proposition.

There will be a difference in your overall investment strategy depending on your Why so you need to carefully consider this before you launch into any investments. For example if you are looking for predictable income then you may opt for a better investment strategy than property investment to obtain that predictable income.

This Why may change as time goes on and that is fine, you need to revisit it and change your investment strategy to accommodate a change in objectives.

Types of investment property

There can be many types of investment property for example:

  • Residential property - this could be buy to let property or properties you purchase, renovate and sell on. It could be holiday property investment or serviced accommodation, or you could be interested in converting property from single residence to a House in Multiple Occupancy (HMO) which is becoming increasingly popular due to tax advantages.
  • Commercial property - offices, industrial, retail or leisure, storage & distribution.
  • Real estate investment trusts (REIT) - this is a property investment company which simulates (from a tax perspective) direct investment in property and avoids the additional layer of taxes that can arise when investing through a corporate structure.

Here is a full list of the types of property investments to consider:

  • Residential
  • Commercial
  • REITs - Real Estate Investment Trusts
  • Buy-to-let
  • Serviced accommodation
  • Rent-to-rent
  • Refurbish and let
  • Buy-refurbish-sell
  • Buying, developing and selling
  • Buying, developing, remortgaging and renting

For anyone beginning their property investment journey, it may be wise to steer clear of commercial property to begin with, especially if you are funding it via borrowing. Commercial property often has larger risks associated with it than residential property.

For those people starting out in property investment then residential property to refurbish can be a good start. This type of small property development can be good as it is a shorter term investment, you can turn the property around quite quickly and potentially gain profit more quickly and you dont have the challenges of tenants, collecting rent, maintenance costs etc.

If you are looking for regular income, then residential buy to let can be a good place to start as you can invest without huge capital to begin with and benefit from rental income. If you are looking for long term investment, or for building long term income such as retirement income, then developing, remortgaging and renting is often the best strategy.

What is the best time to invest in property?

There is no simple answer to this question as it will depend on your own reasons for investing in property, market conditions and your funding. There is no best time to invest in property. When interest rates go up as we see in 2023, if you are sitting on cash in the bank, then it may be a good time to invest as you wont be susceptible to interest rate rises like investors who rely on mortgages to invest.

For people looking at the buy to let market then we are seeing rents in some areas increase by 25% in the last two years and demand from tenants has grown. However, if you are investing in buy to let with a buy to let mortgage, then rising interest rates and changes to tax rules, may mean you will just about break even. That still doesnt mean you shouldnt invest but you need to adopt a long-term view of your investment and ensure when you analyse the deal that you can cover the mortgage payments for the next five years.

Funding property investment

My advice for purchasing buy to let property is to fund as much as you can with savings. For residential property investment you will likely need 25% of the purchase price and can then fund the rest with a mortgage or buy to let mortgage if you are going to rent the property out.

Timing of funding can be critical. For example, if you want to buy a property quickly as it is coming up in an auction, then getting buy to let mortgages completed can take 12 - 20 weeks to process. This is where bridging finance or a bridging loan may come in. However, they tend to be expensive.

There are specific mortgages such as buy to let mortgages, development mortgages etc. it is essential to get the right type of mortgage depending on your plans for the property as there will be different conditions for each type of mortgage.

You may also consider going into property investment with family and friends, however, make sure the arrangement is formalised where possible to avoid any potential conflict or misunderstanding later down the line.

Some people look for other investors to join them in the property investment. You could consider a joint venture with someone else. There are plenty of people sitting on money and cash in the bank that are looking at investing in the right deal. Often people use LinkedIn to approach these types of people, Ive been approached many times by people in this way. Sometimes, the approach may not be to put just capital into an investment project but to bring property expertise into the deal. As a first-time investor, buying your first property, you may benefit with working with an experienced property investor on a joint venture initially.

Here are some funding options to consider:

  • Deposit funds at a minimum (savings)
  • Buy to let mortgages
  • Bridging finance
  • Property development loans
  • Partnerships
  • Joint Ventures (JVs)
  • Rent-to-rent models
  • Friends and family

Dont put off property investment due to funding, there are a variety of ways to fund projects it is just about finding the right financing for your project and circumstances.

Structuring your property portfolio

If you are looking to build a wider property portfolio, then once you have figured out the reasons why, the financing etc, then how you structure your property portfolio is very important. The options open to structuring your property purchase or purchases are:

  • Individual
  • Partnership
  • Limited Company or Special Purpose Vehicle (SPV)
  • Trust

If you are only intending to buy one property, you can buy this as an individual in your own name. This will depend on your own finances, tax position etc.

If you are intending to build a property portfolio with several properties, then you can hold the properties in a limited company or have a limited company for each property. A Special Purpose Vehicle or SPV is simply a regular limited company which is used solely for a particular purpose.In the case of property investment, its used to purchase and rent out properties.

If you require finance, then buying in a single limited company can become complex. My advice is to buy each property via a SPV or separate limited company. This gives you more flexibility with each property deal you do.

Download our guide on buying property through a limited company.

Partnerships can be used but are less popular these days, most people purchase in their own name or via limited company.

Tax considerations for property investment

Depending on how you buy a property (via limited company or individually for example) There are several areas of tax you need to consider:

Stamp Duty Land Tax (SDLT) - Stamp Duty Land Tax (SDLT) is a tax paid when properties change hands. It is paid by the purchaser, based on land or property value, location and nature (residential or commercial). It is due within 14 days with penalties and interest for late filing or payment. There is 3% surcharge if this is not the only residential property owned, or a residential property is being purchased by a company.

Companies, and partnerships that include companies, pay SDLT - exemptions are available for certain property businesses e.g. rental, development, farmhouses and employee residences. Discounts may also be available for bulk purchases, transfers on incorporation, and some special purpose transactions e.g. new build exchange.

Capital Gains Tax (CGT) - At some stage you may want to sell your investment. When you sell a property then you may receive more or less than you paid for it. The difference between selling price and purchase price is your basic capital gain and this may be subject to Capital Gains Tax.

The exception is if the property is part of the trading activities such as property development, in which case the gain will be classed as trading income. Costs of buying and selling are allowable deductions from this gain before it is taxable.

If you have improved or enhanced the property these costs may also be deductible e.g. new conservatory or extension. There is no deduction against gains, for finance costs - loans or mortgages. Capital gains by a company are subject to corporation tax, capital losses may be offset against capital gains, but not income.

There is likely to be a taxable Capital Gain on the sale of any property that has not been your main family home for the whole period of ownership. Capital Gains tax and returns are now due for submission and payment within 30 days of sale, as well as reporting on self-assessment personal tax returns.

Income tax - If you own the property as an individual or partnership, income tax is generally payable on rental income but Buy-to-let landlords can offset certain allowable expenses incurred in the process of letting out a property in order to minimise it.

Corporation tax - Corporation tax is paid to the government by UK companies. It is charged on their profits - the amount of money companies make, minus their costs.

All property income if via a limited company, net of expenses, is subject to corporation tax. Trading or rental losses may be carried forward if not offset against profits in the current year.

After tax funds are still in the company and an extraction strategy may be required to extract these funds tax efficiently from the company. Different strategies may have additional taxes to pay, so seek professional advice. Funds not extracted are available for reinvestment within the company, without extra taxes. dns accountants can help with preparing company accounts, profit extraction strategies and provide advice.

Land remediation relief - Land remediation relief (LRR) can provide tax relief in all commercial property sectors where companies are subject to corporation tax. Unlike capital allowances, LRR is available to property investors and developers alike.

VAT - If buying through a limited company you may need to register for VAT if your total VAT taxable turnover for the last 12 months was over £85,000 (the VAT threshold) or you expect your turnover to go over £85,000 in the next 30 days.

Rental income counts towards your VAT registration threshold. And if your company is already VAT registered then property income etc. may need to include VAT.

Residential properties are exempt from VAT. So, you cannot charge any VAT on rent or sale of residential properties, and hence cannot claim any VAT on associated costs. The exception is the first sale by the builder which is zero rated, enabling the builder to recover VAT on materials.

Commercial properties, you have the choice to “opt to tax” if you want to charge VAT on income and sale, otherwise that too is exempt. If you are renting out a commercial property and your tenant is in business, it can be beneficial for you to register for VAT and charge VAT as you can claim input VAT back from HMRC, on all costs, including purchase. Commercial tenants are mostly registered for VAT so it should not be a cost for them. However, VAT will then be due on the sale of the property too. Again, the exception is the first sale by the builder which is standard rated, regardless of option to tax, enabling the builder to recover VAT on materials.

VAT is a very complicated area, the above is only a general guide and you need to check out the VAT status of exactly what you are supplying, do talk to dns for help.

Inheritance Tax (IHT) - Properties are investment assets so subject to inheritance tax whether in or outside a limited company shell, and hence subject to inheritance tax on death. There are exemptions for gifts made more than seven years before you die, amounts left to your spouse/civil partner or to charities etc.

Annual Tax on Enveloped Dwellings (ATED) - A UK dwelling valued at over £500,000, owned wholly or partly by a company, is subject to Annual Tax on Enveloped Dwellings (ATED). Amounts due are a set amount per band, based on property value. The company is required to file a return annually, even if the exemptions apply. Exemptions are available e.g. for property management or property development.

Enterprise zones - The government has set out a programme which will grant a small number of dedicated geographic areas tax and regulatory rules intended to drive economic growth. These are called investment zones. These offer many advantages including tax benefits to those people investing in property within the zones.

Property deal analysis

There are many potential investment properties that are on the market and often people get carried away and excited by what they perceived as a bargain and dont undertake proper deal analysis.

Before you invest in each and every property, spend time doing a deal analysis. This should look at:

  • cquisition costs
  • Investment strategy
  • Expected rental income
  • Other costs including refurbishment or development costs, maintenance costs, mortgage payments etc
  • Capital appreciation (Focus on properties where you can add value, consider local property prices and the current housing market).
  • Return on investment
  • Exit strategy (if the deal doesnt work out or you need to sell the property)

Calculating the yield on any deal is vitally important. The yield is a measure of the rental income you earn from your property compared to the value of your property. To work out if your rental yield is good, you can compare it to the rate of return you would get if you put your money into a savings account.

Tips for first time property investors

My top tips for first time investors are:

  • Invest hours to learn about property investment at every opportunity - read books, watch videos, speak to current and experienced investors.
  • Always visit a property in person before you buy.
  • Look to invest in a location close to home initially as it will be easier to manage.
  • Undertake full deal analysis before you purchase.
  • Keep your funding options open.
  • Seek advice from dns accountants on tax reliefs, allowances and tax structuring.

Things to consider before you invest in property

  • may not be a good short term investment. It can be hard to get your money back or make a profit in a hurry unless you refurbish and turn this around quickly. Property therefore needs to be a long-term investment rather than just a short-term project.
  • Tax. Government tax changes in the last few years have made property investment less attractive as capital gains and rental yields can be subject to more tax, so look at rental yields etc on every deal.
  • Regulations. Increases in landlord regulations has meant that many landlords are now leaving the buy to let market as rental returns fall and there are more legal obligations for landlords
  • Property prices don’t always rise. Economic factors such as interest rates means that property prices may fall or not rise as much as other investments.
  • Property investment can be complex. Managing rental properties, tenants, mortgage lenders, estate agents, solicitors etc take time, effort and knowledge.


Property investment can be a good investment but not without its risks. If investing in property is something you’re keen to explore, either on its own or as part of a wider investment portfolio to spread the risk, you’ll need to do your research, assess your finances and take the right steps.

For more help and advice download our guides:

Download our buying property through a limited company guide for more tax information.

Download our property guide for first time landlords.

If you would like to speak to people that can offer you advice on property investment, raising funds, tax implications of property investment and buying properties via a limited company Contact our team on 03300 886 686, or email on enquiry@dnsaccountants.co.uk

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About the author
Blog Author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.

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About the author
Blog Author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.


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