Social housing is more than just a property investment. It’s about creating communities, offering stability, and ensuring everyone has a safe place to call home. Unlike typical property investment ventures, social housing involves long-term lease contracts with registered housing providers, offering a hands-free investment opportunity without maintenance or management costs eating into your profits. That means social housing returns high yields, with a minimum of 8% NET, delivering stability through long-term contracts funded by various government sectors.
When it comes to financial returns, social housing has an edge over other types of property investment in the UK. Service charges, property management fees and maintenance costs are just some of the reasons investors don’t see the full value of returns from their rental properties. By the time these fees have been paid, it is difficult for traditional buy-to-let properties to make a fair profit. The benefit of a social housing property is that the FRI lease (Full Repair and Insuring) covers all these expenses, making it much more profitable, and landlords enjoy receiving the rental income every month without accumulating expenses and fees.
Difference Between Social Housing and Traditional Buy-to-Lets
While buy-to-lets focus solely on profit, social housing investments combine financial gains with meaningful societal impact. Across the UK, as the economy and individuals face their own challenges, the waiting list for social housing properties grows larger. The government has to provide individuals with suitable accommodation as per its promise in 2018 with the Homes for Vulnerable Act. Unfortunately, most victims of this shortage are in temporary accommodations such as Airbnb and hotels, proving costly on nightly accommodation rates.
The solution for the government is long-term purpose-provided social housing properties where they can ensure tenants can be looked after and the nightly cost rate is drastically reduced. To combat the homelessness problem, housing providers offer to support these individuals with affordable housing, which we propose to build or renovate. This offers our investors a secure long-term lease agreement with no management, fees or headaches associated with being a traditional buy-to-let landlord.
Social Housing Returns: The Winning Formula
Investing With Purpose
It’s not just about the returns, although they are impressive. It’s about aligning your financial goals with a powerful sense of social responsibility. Investing in social housing means you’re not only securing your future but also providing housing and contributing to the development of stable communities. By partnering with housing providers that care about individuals’ well-being, investors can offer individuals a home purposely renovated for these individuals or families.
Landlords must provide the housing operator with a turn-key asset suitable for the social housing tenant type. This means ensuring it meets all current regulations and passes the due diligence checklist. This will involve up-to-date kitchen appliances, electronics and furniture to house vulnerable adults safely and securely.
At Yield Investing, we do all of this for our investors, providing a newly renovated property which has been checked and approved by the local authority for social housing. This means investors don’t need to tackle the renovation process themselves and can enjoy the rental income and make a positive social impact from day 1 of ownership.
Strategies and Considerations
Understanding the UK property market landscape is key for high-yield returns on social housing investments. While many investors usually focus on location, this aspect should be disassociated with social housing other than what location gives the highest yield. With the lowest property prices in England, the North East generates the highest yield.
You also need to ensure your financial planning and risk mitigation strategies are robust by identifying the goals of the housing operator and ensuring they can sustainably look after these tenants and properties. As you can imagine, certain social housing sectors are more in demand than others, and different providers may look after various tenant types, some easier than others.
For investors concerned about the types of tenants and associated risks, you need to partner with secure and trusted housing providers to take care of your investment for you. At Yield Investing, our investment approach with social housing focuses on where we can give the best returns possible. When you work with us, our team will help you identify regions with high demand for social housing, tying it back to population growth, economic indicators, and government policies.
Sustainability and Effective Management
Although it’s an attractive hands-off investment opportunity, prioritising sustainable practices, meticulous property management from your provider, and ensuring the housing associations you work with foster strong tenant relations are essential for sustained success in social housing investment. If the housing provider you partner with cannot operate the property and look after its tenants, then you are at risk, which is the most significant area for concern for this type of investment.
At Yield Investing, our done-for-you approach and successful track record eliminate the risk in these areas by delivering properties that are completed with tenancy agreements in place and with reputable providers that are professional team evaluate and analyse. With this approach, our clients receive their monthly rental income and enjoy a stress-free property investment.
Assess Potential Returns
As the buy-to-let market across the UK offers low returns, social housing investments should focus on areas where you can achieve the highest yields. This is achieved by the old, simple supply and demand method, focusing on high-quality renovations and housing provider partners.
As an individual trying to access this space for high returns, it is possible to do each step-by-step process alone, but it’s time-consuming and costly. If you’re an investor looking for secure tenancy agreements and high yields of 8-10% net without having to put in the hard work, that’s where we come in. With our investment properties, we take redundant and rundown properties and transform them into suitable forms of accommodation for social housing tenants, delivering high returns for our investors.
Ready to start your investment journey with us?
Investing in social housing means investing in the long term, and if you’re seeking an investment focused on high yields, then it’s perfect for you. This is a sector of housing that may be unique to investors but one that should be in everyone’s portfolio. If you’re curious to explore social housing investments and how to invest purposefully to benefit society and your investment portfolio, contact our property advisors today to learn more about working with us.
