Buy to Let Houses vs Flats

If you're considering investing in property in the UK, you might wonder whether a house or a flat would make a better investment. In this article we'll run through the pros and cons of each type of property.

What is the definition of a house and a flat in the UK for investment purposes?

A house can be detached, semi-detached or terraced, but is always a standalone property with its own front door, and usually a private garden.

Meanwhile a flat is part of 'multi-dwelling' building, with common parts including hallways, corridors and sometimes amenities such as a gym or swimming pool.

Deciding what type of tenants to target

The first step to choose between buying a house or flat for buy-to-plet purposes is often deciding what type of tenants you want to target.

Houses are more likely to attract affluent tenants willing to pay premium rent for a comfortable living space, as well as larger families who need more space. Flats on the other hand may be better suited to young professionals and students.

What are the main advantages of buying a flat for investment purposes

One of the main pros of buying an apartment or a flat is that they come at a lower cost than a house, making this a great way to get into a first buy-to-let investment (although remember that some lenders require a larger Loan to Value (LTV) if you want to buy a flat for investment).

Flats are also often more readily available in larger cities, so it might be easier to find one as you have a larger pool of properties to choose frm.

Finally, maintenance costs and effort can be lower for a flat, since the freeholder will usually be required to take care of the roof, common areas and outdoor spaces. But remember in turn you will be expected to pay service charges and ground rent.

What are the advantages of buying a house for investment purposes?

Houses often have an outdoor space or garden, which is desirable for families with children or pets. They also typically have more bedrooms than flats, making them more attractive to families or groups of friends who want to live together. Also, houses often have dedicated parking spaces, which can be highly desirable for tenants who own a car.

With their increased privacy, and typically being located in quieter areas, houses may attract tenants who want a quieter, more peaceful environment.

With a house you may find there is more potential to expand or improve the property, adding value over time. You could add extensions, convert loft space or garages, or improve the outdoor space, making it more appealing to tenants and increasing rental yields.

Although flats can be refurbished too, the options are usually more limited and you will need freeholder permission, which will add time and expense.

Finally, with a house you will avoid the expenses of service charges and ground rent (although you'll have higher maintenance obligations yourself).

What is freehold tenure for a house?

Freehold tenure is when you own the land and the property without any time limits or restrictions. This kind of ownership gives you complete control over the property, which is a significant advantage for investment purposes. You'll have more flexibility to make modifications or sell the property when you want to.

What is the value of space in the current rental market?

Ever since the Covid pandemic and the rise of homeworking, there has been a greater demand for space in residential properties. This has seen an increase in demand for houses over flats, since they typically have more space.

Why do houses have more flexibility than flats as investment properties?

Houses have a lot of unique benefits for property investors:

• Houses appeal to those who want space. This ranges from those with a large family who want much room to high-end renters who appreciate larger living spaces that offer ample room for luxurious furnishings or unique design touches - all adding up to higher rental income potential.
• Renovation can bring in higher ROI. The potential for extension or renovation work can provide an excellent return on investment (ROI). Extending the property or turning attics and basements into home offices and utility rooms bring a broader appeal to the premises.
• Diverse letting options. Larger houses can be let as one unit, as a house share with multiple tenants, or even sub-divided into bedsits or self-contained units (subject to the necessary planning consents). They have a more significant land size value giving you the flexibility to develop, convert or extend to add value to flip or refinance.

PropertyData can help you with your next investment opportunity.

When investing in real estate, one of the most significant decisions is buying a house or a flat. That choice will depend on many factors:

• How much can you afford upfront?
• How much will upkeep costs be each year?
• What kind of renters do you want?
• What kind of profits you're hoping for in the long run?

Houses offer higher rental income potential and attract more upscale residents, requiring more significant initial and ongoing investments. Flats may be ideal for those seeking affordability over luxury with lower rent than houses. Get your insights to find your next property investment opportunity with PropertyData.