There are many property investment strategies available to create wealth from property & it can be quite confusing to find which strategy or finance option is right for you especially if you’re just starting out. One of the great things about using the property as a vehicle to achieve your goals and desires is you can tailor it to fit your own personal circumstances.
There is no ‘one size fits all’ or a standard ‘cookie cutter’ approach to property investing strategies.
The best property strategies for you will depend on a number of factors such as your own personal financial situation, your attitude to risk, your goals and ambitions, availability of time, hassle, skills and experience, credit rating, and whether you want short or long terms gains.
You might not know of the many strategies which are available to create short & long-term wealth from property.
Property investment strategies:
1. Standard ‘Vanilla’ Single Occupancy Buy To Let
This buy & hold property investment strategy is the least innovative but most proven way to make long-term cashflow and equity by buying common houses with good yields (cashflow) in local areas, that the majority of tenants would want to live in & can afford.
They contain the least risk, you can get lending on them the most easily and they are the easiest to manage. With some cash, you can build up a good-sized portfolio in a relatively short space of time, predictably increase cash flow per unit, and protect your money from low-interest rates and inflation.
Property Investing Niche:
Buy Refurbish Remortgage: This allows you to force the appreciation of the property through refurbishment, and ‘cycle’ one deposit ‘pot,’ getting all of your own money (or JV partner’s money) out upon remortgage, making it an NMLI deal (No Money Left In).
Hybrid refurb & hold: This is where you purchase a property in an expensive area (lower yield), refurb to a high specification, and hold out until the value appreciates (pension-style investing). If the property is upside down, you can use cash flow from some of your positively geared properties to supplement.
Large commercial office space: Buying large commercial buildings & renting out office space to business professionals on FRI (full repairing and insuring) lease
New construction build to rent/sell (residential): The process of buying land, building houses with the intent of reselling or holding for the long term
Hidden profit in short leasehold flats: Buy the property for cash, extend the lease, or get indemnity insurance, set up a new management company (if there is a missing freeholder), increase the value, remortgage and rent out the unit.
2. HMOs (Houses of Multiple Occupation)
With this property investment strategy, instead of letting the property by the house or flat to one family tenant, you let out individual rooms to increase the income, cash flow & yield. The more rooms you can carve out of the unit, the higher the income.
Property Investing Niche:
High-end ‘Boutique:’ The most profitable room-by-room model is the ‘Boutique.’ It is also the model that requires the largest initial outlay of cash. This model provides Boutique, mini hotel room accommodation for high-end professionals near the town centre or more affluent parts of a town or city.
This model commands the highest room rent, attracts the best tenants, and needs to be furnished accordingly.
Postgrad/professional: one step down in ‘quality’ to the ‘Boutique’ model, but with a slightly larger market
Blue collar: A larger market than professional/post-grad, and not as necessary to be right in the town centre, where prices are often higher, as these can be located close to the main industry of the town/city, for example near the hospital or a large manufacturing plant.
Less input cost. Tenants are less fussy about the quality of the accommodation and perhaps an extra room can be squeezed in per house.
Student: Especially effective in University cities, and usually within one mile of campus. Voids are higher because holidays, maintenance and management are also higher, but tenant expectations are lower and a greater tolerance for higher numbers. Accordingly, rent can be higher.
LHA/DSS: The ‘lowest’ end of the market, needing the lowest amount of capital outlay, but commanding the lowest rent per room, and requiring the highest management in time and costs. Space can be maximised to great effect, and the market is wider than ‘Boutique,’ and ‘Postgrad/professional,’ but they are usually management intensive, come with plenty of bad debt and your property may come back in bad condition.
Rent to rent: Also known as sub-letting or corporate lets. You rent an ‘HMO-able’ property from a Landlord on a single-let basis, and then ‘HMO’ it yourself, renting out multiple rooms with a management agreement. You create all the cash flow of an HMO, yet you don’t buy it. No deposit is needed. No big upfront costs, just small refurb costs.
Bed & breakfast: This is where you can rent out rooms on a nightly basis inclusive of breakfast but usually doesn’t offer other meals. Typically B & B’s involve private and family homes offering accommodations between 4 & 11 rooms
Serviced Apartments: Alternative to staying in hotels which provides more of a home experience on a nightly basis and where provides a higher yield and return on investment. These are modern-day fully furnished boutiques and are becoming very fashionable for owners and guests for short and long-term stays.
3. Buy to Sell
Buying, refurbing and selling residential property is known as the trading and those who use this strategy are referred to as ‘traders’ rather than ‘investors’.
If you are looking for bigger ‘lumps’ of cash in the short term, larger scale projects or you want the maximum return on time invested (when exchanging time for money) then flipping can fit your strategy & vision. Its viability depends on market conditions (easier to flip in a growing market), but professionals can flip property through the entire cycle
Property Investing Niche:
Re-modelling property: Find a flat with a large living room and move the kitchen into the living room to create an open-plan living. You can then turn the kitchen into an extra bedroom and sell it as a 2-bedroom flat
Assisted Sale: The strategy, as the name suggests involves you (the investor) ‘assisting’ a seller (or representative of a probate sale) to sell their property. You are effectively doing a joint–venture agreement with the seller and getting paid for helping them sell their property.
Cash purchase, sell on via vendor financing: Buying properties for cash then immediately re-selling them to investors who may not be able to conventionally get a mortgage but have a larger deposit
Subject to planning permission: De-risking larger purchases by exchanging contracts subject to planning permission to convert commercial units to flats to sell on to first-time buyers, owner occupiers or investors.
Shoebox aka studio flats /‘Micky mouse apartments’: Buying a property on one freehold where the units are already carved up (or not), applying for retrospective planning permission/ certificate of lawful use, splitting the freehold and leasehold, creating new titles and long leases and either sell or remortgage & rent out.
Garden Development/Land banking: Purchasing land doesn’t produce cash flow but can be improved to add value. You can sub-divide and sell on with profit after planning permission has been agreed upon. This is also known as increasing the value through intellectual capital
4. Property Lease options
Rather than buying a property and needing the big deposit, you take the option to purchase it. You take control of it through an option that excludes all other potential buyers, giving you the right but not the obligation to buy it, but you don’t ‘pay’ for it until you ‘complete,’ which could be many years down the line. A great way to generate significant cash flow with limited funds.
5. Delayed completions (EDCs)/Instalment contracts
A variation on an option where you exchange property, thereby negating the risk of lost refurb costs. Once you exchange, you basically own it, but you can then ‘delay’ completion, or own in ‘instalments’ over a period of time, often many years.
6. Commercial To Residential Conversions property investment strategy
With newly relaxed planning laws, a specific niche opportunity has opened up. Commercial (B1) properties (offices) are now much easier to convert into residential (C3) flats. Previously planning applications, section 106 contributions (taxes), affordable housing and other restrictions meant only seasoned developers could make any margin out of this niche.
Profits are there in the ‘change of use,’ either holding the flats for rental income or selling/flipping them on for a more immediate profit.
7. Joint Ventures/JV Syndication
Any property buying strategy becomes no money down when a JV partner fronts all the costs. A big advantage of working with a JV partner is that you can still own properties by using more traditional purchasing methods with your partner’s money, and you have a partner who gives other benefits such as knowledge, experience and contacts that you wouldn’t have worked alone. The ownership is shared with a deed of trust protecting both parties’ interests.
Property Investing Niche:
Crowdfunding/Peer-to-Peer lending: An alternative way of raising finance by asking a large number of people each for a small amount of money
Private loans: These are loans not funded by banks or larger institutions but instead from private individuals where favourable rates and terms can be negotiated.
Bridging loans: Short-term funding options used to purchase a property quickly or where it cannot be purchased through traditional finance and where the rates can be rolled up or paid monthly.
Seller financing: This enables you to buy a property without the hassle and costs of going through a bank or other leading institutions. A great way to buy bigger buildings so the owner can receive a great income & interest without the hassle of dealing with tenants.
8. Deal Packaging property investment strategy
A packaged deal is a deal you sell for a fee, for someone else to buy. This is also known as wholesaling or property facing where you sell the lead using assignable contracts, sub-sales & option agreements. Client-facing is where the clients pay you more to manage the process (purchasing, legal, refurb) and assist them in building up their portfolios.
Property Investing Niche:
Turn-key investing: This is where you buy, refurbish and sell properties to overseas investors seeking a great place to park their money. You will handle the management making the investment truly passive for the purchasing investor. Upside: you can charge higher fees.
If you would like any assistance on how we can help you move forward with any of these strategies or would simply like more information on how we can help you get closer to your property goals, then feel free to get in touch or simply leave a comment below, we would love to help.
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What is Mark Homer’s property investment strategy?
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