As the residential property market continues to demonstrate strong returns on investment and the market increasing provides the means of doing so through tailored online and offline services, individual investors are looking to diversify their investment portfolios and seek out lucrative opportunities.
The demand for residential property investment
The Next Generation Landlord Report published by Paragon Bank in October reveals that aspiring portfolio landlords are targeting more complex rental properties, such as houses in multiple occupation (HMO) and multi-unit blocks (MUB) in response to growing demand and attractive yields. The survey of 500 landlords found that those owning three or fewer rental properties are shifting their focus towards more intricate investment strategies: of those surveyed, only 8% currently invest in HMOs, but this figure is expected to rise to 17%.Furthermore, investment in MUBs is predicted to grow from 14% to 26% as these landlords expand their portfolios.
Demand is the key factor to which this ‘new breed’ of landlords is responding. Research from the British Property Federation (BPF) reveals a £250bn investment need in Build to Rent (BTR) alone to meet future demand. Rising house prices, increasing geographical mobility, and changing lifestyle preferences have all contributed to the expanding appeal of BTR.
Currently, 5 million households live in rented properties in the UK, with a significant portion (4.9 million) residing in the Buy to Let (BTL) sector. According to Rightmove (and we’ve seen a similar trend across LRG-owned local lettings brands) the number of tenants in the UK increased by 6% in 2022 but this coincided with 50% fewer properties being available.
Naturally this creates numerous opportunities for portfolio investment, whether on behalf of a company, an individual, or a group of individuals forming their own company to benefit from tax efficiencies.
The rise of managed property investments
The managed property investments, to which many individual investors are turning, often takes the form of portfolio investments, where multiple properties or even entire blocks are owned and managed as a single entity. This structure appeals to investors who seek the benefits of a diversified portfolio, combined with the convenience of professional management. Furthermore, alternative residential sectors, including student accommodation and later-living properties, are gaining traction among investors seeking new opportunities.
Capitalising on change-of-use legislation
One of the most compelling strategies for investors is leveraging recent changes in legislation, particularly the extension of permitted development rights (PDR). These rights allow for the conversion of commercial properties into residential units with minimal planning requirements and, accordingly, considerably less cost.
PDR conversions, often involving little more than internal modifications, allow investors to benefit from substantial value appreciation as residential properties continue to outperform commercial assets.
A prime example of ‘convert to rent’ is Mountbatten House in Chatham, a 106-unit private rented sector office to residential conversion which is currently being redeveloped and will be available in September 2026.
Repurposed commercial buildings—particularly historic ones located in prime areas—are often highly sought after by renters. According to HomeViews’ 2023 Build to Rent report, office-to-residential conversions earn the highest resident approval rankings, largely due to their prime locations, design quality, and efficient management. For investors, these schemes represent a highly effective strategy for generating both immediate income and long-term value.
Perhaps convert to rent (CTR) alongside BTR, is part of the answer to the housing crisis?
Build to rent: a risk-averse investment
BTR properties, in particular, are emerging as one of the safest investment avenues in the residential property market because they offer the opportunity to spread risk across multiple tenures and tenant types. Unlike outright sales, which are subject to market volatility, BTR delivers steady returns through long-term rental income.
Furthermore, BTR can streamline development timeframes, allowing for quicker returns. The shift towards rental properties also facilitates earlier infrastructure development, contributing to the creation of vibrant communities and driving up property values. For individuals, BTR provides a strategic investment approach, offering the balance of risk management, rental income, and capital appreciation.
The role of professional services and technology
As the residential property market becomes increasingly professionalised, the need for expert advice and management has never been greater. investors must navigate complex regulations, from tenant laws to the growing requirements for energy-efficient properties (such as the anticipated need for EPC ratings of C or above). Given these challenges, the demand for integrated services—covering planning, surveying, management, and lettings—has risen significantly.
Leading property firms, such as LRG, are responding to this need by providing a full suite of services, supported by cutting-edge technology, such as online platforms allow investors to browse property portfolios, access data, and manage investments with a high degree of autonomy.
The residential property sector shows no signs of losing its appeal, even in the face of regulatory and economic pressures. For individuals, the question is not whether to invest but how to do so effectively. While higher taxes and greater regulation seem under the new government may be inevitable, structuring investments to adapt to these changes can make the difference between success or failure. By taking advantage of emerging trends and managing property portfolios as efficiently as technology allows, individuals can continue to profit from the booming residential market.
