Whether it is investing in commercial or residential property in the UK, the more popular reasons for it, particularly in London, are the UKs stable economy, multicultural environment and wonderful shopping facilities. Needless to say, there are other financial prospects that you could benefit from.

Commercial Property

Depending on the type of commercial property you are thinking of buying, or have bought, you can receive cuts in taxes. So, be sure to verify what tax cuts you might get from the medium you are buying through, like a limited company or a partnership, or even through an individual.

Also, the stability of house prices in the UK is not always predictable, making it difficult to anticipate the kind of returns you might get. However, having a diversified spread of commercial property investments means that you can expect some modest returns through a growth of capital. If you are renting out a property, then it will probably be on a fixed-term lease, where the periodic reviews of rents usually lead to an increase in the rent paid by the tenants.

So, for example, if you bought an office and you have signed a contract to rent it out for a period of eight years, this contract is called a lease. The types of commercial property available for investment in the UK are offices, shops, restaurants, leisure centres and industrial workshop units.

Residential Property

Some investors are seen to purchase residential property for their children coming to the UK for higher education. Once the courses, hence the purpose of the property, comes to an end, the investors either sell the property or rent it out, to derive some modest returns.

In fact, investing on residential property just to rent it out to tenants is more favoured than selling it, particularly when the market for house prices becomes unstable.

As with commercial property, if you spread your investments, i.e, if you buy different types of residential property, you can benefit from less risks and more returns.

Needless to say, buying houses is perceived to be easier, as most people are familiar with how mortgages work and can manage the property themselves, as opposed to hiring an intermediary source. Furthermore, if you are renting out your own property, you can claim tax relief on the basis of the interest you pay on any loans you take out from the bank, to purchase your property. You may also claim tax relief from any furniture that needs replacing.

If you are a married couple and consider owning the property jointly, then your overall income tax can reduce, because of the two sets of personal allowances and basic rate of taxes.

Luxury Developments

Investing in a luxury development is considered to mean that you have reached the top of the property ladder, i.e, you have had experience of investing in residential and commercial property.

In recent times, London, in particular has made more progress in catering for luxury developments. What are known as high-rise buildings, or tall, palatial residential property, are seen to become a part of the landscape, especially in Canary Wharf and the Docklands. More such developments are being planned near Kings Cross (Regent Quarter), London Bridge, Elephant & Castle and Paddington.

Moreover, while luxury developments are usually purchased for the investors to reside in themselves, these can also be rented out to tenants, creating another source of income. This brings out a fact that investing in property often brings more returns, as opposed to investing in the stock market! You could also invest in a luxury development as a holiday home, where your friends, relatives, or even tenants could rent it. Alternatively, you could invest in it as a retirement home for you and your immediate family to spend time in.

If you are considering investing in a development that has not been built yet, you could be in for more profits. This is because the development will be worth much more when it is built, then when you had paid for it to be built. The types of luxury developments available are: penthouses, luxury apartments and mansions.

Building Your Dream House

While getting a house built in the UK, particularly in London, does seem difficult to imagine, in reality, it is not.

Investors often plan to build a house in the countryside, or outside London, as it is easier because there is more land available for plots to be invested in and houses to be built on. While the whole process of getting your dream house built can take up to a few years, with the cooperation of the Local District Council and the Local Planning Authority, things should run smoother.

If you have already invested, or are thinking of investing in a commercial or residential property in the UK, this will make it easier for you to get your dream house built.

This is because banks, building societies and Local Planning Authorities look for proof of a regular income, a strong credit history and the types of property you have made investments on in the UK.

A good reason for you to get a house built, as opposed to extending or renovating the house you currently reside in, is because you will not have to pay any Value Added Tax (VAT) on all the building work done. However, if you buy the building materials yourself and you are managing the project, instead of hiring a building contractor, you will have to pay the VAT. Yet, once the building is completed, you can apply to your local Customs and Excise VAT office to claim back the VAT you had paid.

If you are thinking of generating some or all the funds for your dream home from the profits you make by selling a house you own in the UK, you may not have to pay the Capital Gains Tax. This is usually the situation, when your house has been resided in for 12 months or more, formalising it as a residential property and not a commercial one.

Buy-to-Let Properties

Letting a property means renting a property, or parts of it, to tenants. Investing in a property to rent it out, or buying-to-let has become very popular, as it has been seen that investors yield much more returns from it, then they would from shares in the stock market, or pension schemes.

The returns will be high and could even grow stronger, if the property has been let or rented out on a fixed-term lease- this is a contract of renting a property.

So, the periodic reviews of rents usually lead to an increase in the rent paid by the tenants. Furthermore, the chances of getting potential tenants to let your property becomes higher, if your residential or commercial property is in a city, or near shops in a city centre, or is situated in or near a place where employability is high, or in places to access various modes of public transport.

In London, some investors experiment a bit by investing in property in or near places where there is redevelopment or where a new shopping site, or landmark is being constructed. This is because tenants may want to relocate there and might therefore be looking for accommodation.

So, it is best to invest in a property which can bring in both high capital gains and rental income. However, in London, it can get a bit difficult to find both of these in one area. While some areas yield higher income from renting, other areas yield higher capital gains.