The Best Property Investment Strategies 2023: Factors to Consider

In property investing, it's useful to monitor the latest trends. Understanding the best property investment strategies in 2023 could help you optimise your investment returns.

Whether an entry-level investor embarking on their inaugural acquisition, or a seasoned market player striving to fortify their existing portfolio, this guide aims to provide valuable insights into the most profitable property development strategies this year.

This article offers advice to facilitate a diversified, profitable investment portfolio – equip yourself with knowledge of the best property investment strategies of 2023 and seize the opportunity to excel in this competitive investment space.

Real Estate Strategies and Sectors to Watch in 2023

The real estate market is a broad and diverse sphere with numerous strategies and sectors. CBRE News has recently provided valuable insights into the preferred real estate strategies and sectors for 2023.

On the strategies front, the "Opportunistic" approach tops the list with 35% of investors. This strategy typically involves high-risk, high-return investments, often requiring significant improvements or developments on a property. These investments may include undeveloped land, properties requiring substantial renovations, or markets with high growth potential.

Following this, 25% of investors favour the "Value Add" strategy, which involves properties needing minor improvements or management changes to boost their value. This strategy provides medium to high returns and is less risky than opportunistic investments.

The "Core" and "Core Plus" strategies each secure 12% preference. Core investments are usually stable, fully leased, and well-located properties with steady cash flows. Core Plus is similar but involves a moderate risk and value-add potential, often in minor property improvements or lease-up opportunities.

Real Estate Sector Investment Preferences in 2023

When we turn our attention to the preferred real estate sectors for 2023, Residential properties take the lead at 30%. This covers everything from single-family homes to large apartment complexes, serving as a staple in most real estate portfolios.

Debt strategies represent 9% of investors' preferences. These involve lending money for real estate purchases and collecting interest as a source of return. Distressed assets and non-performing loans, usually associated with high risk but potentially high returns, account for 7%.

Close on its heels is the Industrial and Logistics sector, which 29% of investors prefer. This includes warehouses, distribution centres, and manufacturing facilities, a sector bolstered by the increasing demand for e-commerce and supply chain infrastructure.

Office spaces constitute 18% of preferences, with well-located, modern office spaces offering stable rental incomes. Retail properties make up 8%, with their success often hinging on location, tenant mix, and consumer behaviour trends.

Hotels and Resorts represent 4% of the preferred sectors, and this segment can offer substantial returns but is also susceptible to tourism industry fluctuations. The remaining 12% is allocated to other real estate sectors, covering various assets from healthcare facilities to student housing.

How does a Diverse Investment Portfolio help Property Investment in 2023?

In 2023 more than ever before it's important to have a diversified investment portfolio, spreading risk across different asset classes and enhancing the potential for higher returns.

Residential property is an essential part of your portfolio, alongside assets such as stocks and fixed term saving accounts.

Investing directly in residential properties, such as houses or flats, offers returns through rental income and property appreciation, despite ownership responsibilities, like maintenance and dealing with tenants.

Alternatively Real Estate Investment Trusts (REITs) own and often manage income-producing real estate. Investing in REITs provides a way to invest in real estate without having to physically own property.

Which is better, REITs or Property Ownership?

While Real Estate Investment Trusts (REITs) offer a convenient and relatively hands-off approach to real estate investment, direct property ownership has several advantages:

  1. 1. Control:When you own a property, you have full control over it. You decide the rent, who your tenants are, when and what kind of renovations you want to do, and when you might want to sell the property.
  2. 2. Potential for higher returns:Directly owned properties can deliver higher returns compared to REITs, especially if you're willing and able to put in the effort to manage the property effectively. This could involve adding value through renovations, effectively managing tenants, or identifying and capitalising on undervalued properties.
  3. 3. Leverage:Property owners can use leverage (i.e., mortgage financing) to buy a property, which can significantly boost the potential return on investment if property values increase.
  4. 4. Tax benefits:Owning property can come with several tax benefits not available to REIT investors. These can include deductions for mortgage interest, property taxes, and depreciation.
  5. 5. Direct impact on property value:As a property owner, the improvements and enhancements you make can directly increase the value of your investment.

However, it's important to note that while property owners can benefit from these advantages, it also involves more active involvement and carries its own risks. These risks can include property damage, vacancies, and fluctuations in property values.

Furthermore, property ownership requires more substantial upfront capital than REIT investments. Individuals should consider their financial situation, risk tolerance, and investment goals when choosing between these options.

Navigating Holiday Lets: A Potentially Profitable Property Investment Strategy in 2023

The landscape of property investment is vast, with numerous strategies offering varying levels of risk and return. According to Property Road, Holiday lets emerged as one of the UK's most profitable types of property investment strategy. However, the success of holiday lets is contingent on a critical factor: maintaining high occupancy rates.

Holiday lets offer unique benefits compared to traditional buy-to-let properties, including the potential for higher weekly rents due to their appeal to holidaymakers. That said, the potential profitability of Holiday lets also brings a caveat: not all Holiday lets make money.

Indeed, the 'trick' to maximising returns from a holiday let investment lies in keeping occupancy rates high. High occupancy is crucial in offsetting the costs associated with the property, including maintenance, utilities, and any mortgage payments. Additionally, periods of high occupancy translate to more rental income, enhancing the property's profitability.

But how does one achieve high occupancy rates? Several factors can influence this. Firstly, the location of the property is paramount. Holiday lets situated in tourist hotspots or areas of natural beauty tend to have higher occupancy rates due to their appeal to holidaymakers. Secondly, the property's quality and amenities play a significant role. Modern, well-furnished properties with amenities like Wi-Fi, hot tubs, or proximity to attractions can command higher rents and attract more tenants.

Additionally, effective marketing and management are vital. This includes maintaining a solid online presence, offering excellent customer service, and ensuring the property is well-maintained and clean.

In essence, while holiday lets can be a potentially lucrative property investment strategy in 2023, they require meticulous planning, management, and strategic location selection. Implementing these practices will help to maximise occupancy rates and, in turn, bolster the profitability of your Holiday let investment.

Use PropertyData for investment research

Regarding property investment strategies in 2023, it's clear that thorough research and data analysis are vital to making informed decisions. To effectively meet this need, we encourage you to explore the comprehensive set of tools Property Data provides.

Property Data's Local Data tool provides a deep dive into the local property market, offering valuable insights into house prices, rental yields, rental demand, and demographic information. This can be invaluable when determining the viability of potential investments in specific areas.

The On-marketing source tool is another excellent resource helping you find available investment properties. It pulls together listings from various sources that match a range of investment strategies, providing a one-stop shop for your property search needs.

Finally, the Plot Map tool allows you to evaluate potential development sites by giving an aerial view of plot sizes and dimensions, land use, and surrounding amenities.

In the ever-changing world of property investment, having the correct data at your fingertips is critical to successful strategy development and decision-making. Property Data offers powerful tools to help steer your research, refine your investment strategies, and unlock new opportunities. Make the most of 2023 by integrating these tools into your property investment research process.

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Transparent data promise

Where does the raw data come from?

Property listings seen on rightmove.co.uk, zoopla.co.uk and onthemarket.com.

How often is the data updated?

The data is updated in near real-time.

What time period does the data cover?

This is a real-time market snapshot - the data covers currently listed properties. Once properties are removed from the portal, they are soon removed from this tab.

How is the raw data processed?

Duplicates from multiple sources are matched and reconciled as far as possible. Listings with obvious errors, where price or number or bedrooms appear out of range, are discarded.

What are the statistics used?

Averages shown are the interquartile mean, a type of average that is insensitive to outliers while being its own distinct parameter. The 80% range means that 80% of the listed properties fall inside this range.

Where does the raw data come from?

Property listings seen on rightmove.co.uk, zoopla.co.uk and onthemarket.com.

How do you know the square footage of properties?

We use proprietary technology to read the square footage of properties from agent floorplans. Although we cannot determine the square footage for all properties, we can usually get sufficient coverage. Agents are sometimes known to inflate square footage, and this should be borne in mind as a weakness of this data.

How often is the data updated?

The data is updated in near real-time.

What time period does the data cover?

This is a real-time market snapshot - the data covers currently listed properties. Once properties are removed from the portal, they are soon removed from this tab.

How is the raw data processed?

Duplicates from multiple sources are matched and reconciled as far as possible. Listings with obvious errors, where price or number or bedrooms appear out of range, are discarded.

What are the statistics used?

The average shown is the interquartile mean, a type of average that is insensitive to outliers while being its own distinct parameter. The 80% range means that 80% of the listed properties fall inside this range.

Where does the raw data come from?

Property "price paid" data provided by the Land Registry.

How often is the data updated?

Once per month when released by the Land Registry, typically towards the end of each calendar month covering up to the end of the previous calendar month.

What time period does the data cover?

You can customise the time period using the filter at the top of the view. The default time period is up to 9 months back from today's date. The latest data covers the period up to 2024-03-01, although some sales that took place before this date may still be added in the coming months.

How is the raw data processed?

No additional processes are applied to this data.

What are the statistics used?

Averages shown are the interquartile mean, a type of average that is insensitive to outliers while being its own distinct parameter. The 80% range means that 80% of the listed properties fall inside this range.

Where does the raw data come from?

Property "price paid" data provided by the Land Registry, and Energy Performance Certificate (EPC) data provided by Department for Levelling Up, Housing & Communities.

How do you know the square footage of properties?

We match the Land Registry data to EPC data provided by the Department for Levelling Up, Housing & Communities. Due to the fact that not all properties sold have had an EPC and vagaries of addressing in the UK, we are not able to determine the square footage of all properties, but we can usually get sufficient coverage.

How often is the data updated?

The private paid data is updated once per month when released by the Land Registry, typically towards the end of each calendar month covering up to the end of the previous calendar month. The energy performance certificate database is updated monthly.

What time period does the data cover?

You can customise the time period using the filter at the top of the view. The default time period is up to 9 months back from today's date. The latest data covers the period up to 2024-03-01, although some sales that took place before this date may still be added in the coming months.

How is the raw data processed?

No additional processes are applied to this data.

What are the statistics used?

The average shown is the interquartile mean, a type of average that is insensitive to outliers while being its own distinct parameter. The 80% range means that 80% of the listed properties fall inside this range.

Where does the raw data come from?

Property listings seen on rightmove.co.uk, zoopla.co.uk and onthemarket.com.

How often is the data updated?

The data is updated in near real-time.

What time period does the data cover?

This is a real-time market snapshot - the data covers currently listed properties. Once properties are removed from the portal, they are soon removed from this tab.

How is the raw data processed?

Duplicates from multiple sources are matched and reconciled as far as possible. Listings with obvious errors, where price or number or bedrooms appear out of range, are discarded.

What are the statistics used?

The average shown is the interquartile mean, a type of average that is insensitive to outliers while being its own distinct parameter. The 80% range means that 80% of the listed properties fall inside this range.

Where does the raw data come from?

Room let listings on SpareRoom, the UK's biggest room letting website.

How often is the data updated?

The data is updated in near real-time.

What time period does the data cover?

This is a real-time market snapshot - the data covers currently listed properties. Once properties are removed from SpareRoom, they are soon removed from this tab.

How is the raw data processed?

Listings with obvious errors, where price or number or bedrooms appear out of range, are discarded.

What are the statistics used?

The average shown is the interquartile mean, a type of average that is insensitive to outliers while being its own distinct parameter. The 80% range means that 80% of the listed properties fall inside this range.

Where does the raw data come from?

Property listings seen on rightmove.co.uk, zoopla.co.uk and onthemarket.com.

How often is the data updated?

The data is updated in near real-time.

What time period does the data cover?

This is a real-time market snapshot - the data covers currently listed properties. Once properties are removed from the portal, they are soon removed from this tab.

How is the raw data processed?

Duplicates from multiple sources are matched and reconciled as far as possible. Listings with obvious errors, where price or number or bedrooms appear out of range, are discarded. Yields are calculated by comparing only properties with the same number of bedrooms, e.g. 3-bedroom properties for rent with 3-bedroom properties for sale.

What is the yield calculation used?

The calculation used is (average_weekly_asking_rent * 52 / average_asking_price), expressed as a percentage. It is a top-line gross yield, meaning no expenses are considered.

What are the statistics used?

The average shown is the interquartile mean, a type of average that is insensitive to outliers while being its own distinct parameter. The 80% range means that 80% of the listed properties fall inside this range.

Where does the raw data come from?

Property listings seen on rightmove.co.uk, zoopla.co.uk and onthemarket.com.

How often is the data updated?

The data is updated in near real-time.

What time period does the data cover?

This is a real-time market snapshot - the data covers currently listed properties. Once properties are removed from Zoopla, Rightmove or Spareroom, they are soon removed from this tab.

How is the raw data processed?

Duplicates from multiple sources are matched and reconciled as far as possible. Yields are calculated by comparing only properties with the same number of bedrooms, e.g. 3-bedroom properties for rent with 3-bedroom properties for sale. For the SpareRoom data, hypothetical properties consisting of two to six average double rooms with shared bathrooms are used to derived average rent. For all sources, listings with obvious errors, where price or number or bedrooms appear out of range, are discarded.

What is the yield calculation used?

The calculation used is (average_weekly_asking_rent * 52 / average_asking_price), expressed as a percentage. It is a top-line gross yield, meaning no expenses are considered.

What are the statistics used?

The average shown is the interquartile mean, a type of average that is insensitive to outliers while being its own distinct parameter. The 80% range means that 80% of the listed properties fall inside this range.

Where does the raw data come from?

Property "price paid" data provided by the Land Registry.

How often is the data updated?

Once per month when released by the Land Registry, typically towards the end of each calendar month covering up to the end of the previous calendar month.

Zoopla Zed-index

What time period does the data cover?

The data covers transactions in the last six years

How is the raw data processed?

No additional processes are applied to this data.

What are the statistics used?

The average shown is the interquartile mean, a type of average that is insensitive to outliers while being its own distinct parameter. The 80% range means that 80% of the listed properties fall inside this range.

Where does the raw data come from?

Property listings seen on rightmove.co.uk, zoopla.co.uk and onthemarket.com.

How often is the data updated?

The listings data is updated in near real-time. The Land Registry data is updated once per month when released, typically towards the end of each calendar month covering up to the end of the previous calendar month.

What time period does the data cover?

The price paid data shown goes back to January 2015. The listings data is a real-time market snapshot - the data covers currently listed properties. Once properties are removed from the portal, they are soon removed from this tab.

How is the raw data processed?

Duplicates from multiple sources are matched and reconciled as far as possible. Listings with obvious errors, where price or number or bedrooms appear out of range, are discarded.

What are the calculations used?

Average sales per month are for the last 3 finalised months. Turnover is average sales per month divided by total for sale. Inventory is 100 divided by turnover.

Where does the raw data come from?

Property listings seen on rightmove.co.uk, zoopla.co.uk and onthemarket.com.

How often is the data updated?

The listings data is updated in near real-time. The Land Registry data is updated once per month when released, typically towards the end of each calendar month covering up to the end of the previous calendar month.

What time period does the data cover?

This is a real-time market snapshot - the data covers currently listed properties. Once properties are removed from the portal, they are soon removed from this tab.

How is the raw data processed?

Duplicates from multiple sources are matched and reconciled as far as possible. Listings with obvious errors, where price or number or bedrooms appear out of range, are discarded.

Where does the raw data come from?

We receive data on the extent and corporate ownership of all land titles in England & Wales from the Land Registry.

How often is the data updated?

The data is updated once per month when released, typically in the first few days of each calendar month.

What time period does the data cover?

This is an ownership snapshot - the data represents ownership as recorded by the Land Registry at the last monthly export.

How is the raw data processed?

No additional processes are applied to this data.

Where does the raw data come from?

We source different expert forecasts Savills, Knight Frank, OBR

How often is the data updated?

The data is updated annually when new forecasts are released, typically towards the beginning of the year.

How is the raw data processed?

We calculate a consensus forecast using a simple mean average.