If you’ve been wondering how to invest how to invest £150,000 in the UK, there are a few routes you could take. Two options you might want to look at are the stock market or property. There is a certain volatility to investing in the stock market in the sense that the prices and performance of stocks change constantly. However, you are afforded a more flexible investment with the chance to sell quickly, a range of alternatives, and fewer barriers to entry. The property market in the UK, however, remains more bullish and constant. There is a general, strong trend of value growth in the property market meaning you can feel assured that over the years there will be a growing return on investment. Although, entering and exiting the market is more challenging and requires more effort. When both buying and selling you would be putting a lot more time and resources into the process than when leaving the stock market.
Let’s take a look at if investing in property is the choice for you. With £150,000, you have the option to purchase a buy-to-let property upfront without taking out a mortgage. We are going to break down two options: buying a buy-to-let property entirely with cash and leveraging mortgages to divide the capital into buying multiple investment properties. So, which one is the right option for you and the £150,000 you have in hand?
Location, location, location... where should I invest?
Before we look at how to plan your investment, let’s first consider where.
As of July 2023, the average house price across the UK stood at £289,824 - so with £150,000 to spare, your choice of location must be carefully selected.
- The North East of England had an average property price of £163,371 in January 2023, much lower than the national average, making areas such as Sunderland, Newcastle and Country Durham potential spots for investing £150,000.
- Another benefit of investing in this region on top of its affordable price point is the value growth of property in the area. In the year from January 2022 to 2023, property prices saw a 10% growth - this is more than anywhere else in the UK and shows the increasing attractiveness of the location.
Addressing all costs - how much do I need overall?
There are additional costs incurred when buying a property that should be considered, and when choosing a property, it is important to account for these.
With £150,000 to invest, the property you can afford won’t necessarily cost that amount. If we assume the property is worth £144,000, your Stamp Duty Land Tax will be around £4,320 and other costs could amount to £3,500, meaning you could be spending up to £151,820.
Financing my investment: should I buy in cash?
By purchasing a property outright, you have a simple journey which rids you of the hassle of fluctuating mortgage rates and monthly mortgage payments. You’re greeted with peace of mind as you reduce the risk of default, and are provided with the bliss of receiving monthly rental payments that don’t need to have mortgage payments taken off them.
Financing my investment: should I use a mortgage?
With mortgages, you can take that £150,000 of capital and invest in two properties instead to start building your portfolio. This could reduce your overall risk as the entirety of your capital is not tied up in a single property. Using the money to build a portfolio means you are receiving rental income from multiple properties, and you’re benefiting from the capital growth of all properties. Ultimately, your return on investment becomes much larger when you use mortgages to leverage properties.
Financing my investment: could I buy more properties by using mortgages?
By leveraging mortgages, you can stretch your capital further and invest in more properties. The number of properties you can purchase is dependent on the loan-to-value (LTV) ratio of your mortgage and the cost of the properties. With a larger deposit, you tend to receive more favourable interest rates, which is an important consideration to make when deciding how to plan your investment. Looking at properties valued at £144,000, with a 60% LTV you would be able to purchase two properties with £150,000. With a 75% LTV, you have the ability to purchase three £144,000 properties with your £150,000 investment.
Should I invest £150,000 in property or the stock market?
The answer to this question would depend largely on what you are looking to achieve from your investment and how you want your investment to be structured. There is a certain volatility to investing in the stock market in the sense that the prices and performance of stocks change constantly. However, you are afforded a more flexible investment with the chance to sell quickly, a range of alternatives, and fewer barriers to entry. The property market in the UK, however, remains more bullish and constant. There is a general, strong trend of value growth in the property market meaning you can feel assured that over the years there will be a growing return on investment. However, entering and exiting the market is more challenging and requires more effort. You need to be able to cover the deposit in order to start your buy-to-let investment journey and when selling you would be putting a lot more time and resources into the process than when leaving the stock market.
So, which option is best for you?
If you decide you want to spend your £150,000 on property investment and are looking for the long-term value growth that property has to offer, you can then start to think about how you are going to use your capital. Your choice of cash or mortgage will depend on your investing goals. If you’re aiming for long-term returns and major capital growth then leveraging mortgages is the perfect way to start your portfolio. Whereas if your focus remains mainly on yields, buying in cash may be your best option.
Are you looking to start your buy-to-let investment journey? Find your property on our marketplace of new-build and second-hand properties.