How to Invest 500k for Passive Income (5 Tips)

There are several ways to get involved in real estate investing, and knowing the best way can be challenging.

From HMOs (Houses of Multiple Occupancy) to luxury city centre apartments, there are plenty of avenues to invest 500,000 pounds.

With property investment, the most popular investment strategies are:

• Buy to let is buying a property and renting it out to tenants. (Read our Buy to Let Property guide)
• Buy to sell, which is buying a property to sell it for a higher price.

If you’re wondering how to invest £500k in real estate, buy-to-let investment is the safest bet.

With buy-to-let, you can make attractive returns through rental income and keep an eye on the future with capital gains.

If you are investing for income, these regular returns from rent are ideal, and as UK property prices are increasing at their highest rate since 2004, your investment will certainly be safe for the future.

Another factor worth considering is whether you want to invest in residential buy-to-let or commercial real estate.

Peer-to-peer lending platform Sourced Capital found that residential buy-to-let offers a better investment opportunity than commercial property, with the latter offering a rental yield of 2.2%.

Back in July 2020, peer-to-peer lending platforms found that the average rental yield in Liverpool was 5.5% at the time. So, if you invest 500,000, you can see returns of £153,480 over five years – and this is just the smaller end of the estimate.

That’s an annual return of over 30k.

With rents rising rapidly in 2023, you can expect your annual gross return to be even higher now.

If you are investing for income, a residential buy-to-let seems ideal.

For the same period, Sourced Capital found that commercial property will see a return of under 60,000 over the five years. That’s an annual return of 12k.

If you don’t fancy being a hands-on landlord and want a more hands-off approach, you can always opt for a property management company.

They will deal with the ins and outs of being a landlord and portfolio management and help you have a more hands-off approach.

For beginners, portfolio management can be complex, so hiring a property management company may be a smart bet.

Overall, buy-to-let investment is both safe, secure, and reliable.

The bricks-and-mortar industry is incredibly safe compared to the stock market.

Market trends all point to property being a fantastic investment, and these returns and income can be even higher if you have an extensive portfolio.

If you are wondering how to invest £500k in property, an important thing to consider is where to invest 500k.

Think about where you will get the best returns on your property investment through rental yields and capital growth.

Rental yield is the percentage of return on investment you receive through rental income.

It is calculated by dividing your annual rental income by the property’s purchase price and multiplying that number by 100 for a percentage.

Generally, anything above 5 or 6% is considered good.

The country’s average rental yield is around 5.2%, but the North West offers excellent rental yields of up to 7% in Liverpool and Manchester.

Combining this with the lower property prices in the North West compared to London and an expected house price growth of 20.2% by 2028, you are looking at the perfect buy-to-let market.

Think about where to invest 500k to get the most out of your investment.

You want to get multiple properties, so those more affordable are ideal.

However, you should also think about areas with the best track record when it comes to investment.

This means investing in areas with high rental yields, and the property market performs well overall.

We’ve already established that the North West is a haven for buy-to-let investment, with outstanding rental yields of up to 7%.

Consider buying properties in different postcodes across top North West cities like Liverpool and Manchester.

You can also venture into other UK areas if you find investment opportunities that fit your requirements.

If you’ve been researching the property investment market, you may have encountered the term ‘below-market value deals’.

Below-market value deals are property investment opportunities priced lower than similar properties in the same area.

Bagging below-market deals are perfect when building a property portfolio, but how do you find below-market value properties? The answer is by purchasing off-plan properties.

Off-plan property investment is when an investor buys property under construction or still in the planning stage.

Using computer-generated imagery, the investor can see how the property will look before completion through a showroom or a virtual tour.

The benefits of investing in off-plan are:

• Below-market prices.
• Better choice of units within a new development.
• Higher tenant demand as people are drawn to new-build homes.

There are, however, risks with off-plan property, which mainly revolve around the property development company delivering the project.

To avoid any potential danger, consider investing via a property investment company.

At RWinvest, we only work with the best and most reliable developers, so you can be sure your money is in safe hands.

If you ask how much money you need to invest in property in the UK or how to invest 500k in real estate, off-plan is an excellent opportunity for you.