Examples of Property Investment Strategies
- Residential Buy-to-Let (single or portfolio)
- Buy, Renovate and Sell
- House in Multiple Occupation (HMO)
- Conversions – Commercial to Residential
- Residential Developments
Buy-to-Let Strategy
Buy-to-Let strategy is one of Jay’s personal favourite strategies. Jay calls this the snow ball effect, the more you add to your portfolio, the faster the growth and progression is noticed. This method would be taken with a view for medium to long term, this is achieved through gearing which will be covered next.
Gearing
Gearing refers to the level of an investor’s debt related to their equity capital. The secret of property investment is to use as much of the banks money rather than your own. An average for buy-to-let ratio would be 75% loan to value (LTV), broken down 25% deposit from the investor and 75% as loan from the bank.
Built in Equity
If an investor was to put an offer 10% lower than offered on the market, you automatically have made £10,000 on a property asking £100,000. This is such a simple way of making money before you get the keys.
Use the banks’ money to make money
It makes sense, in most cases, to use bank loans to improve the profitability of your investment. For example, if you can obtain a loan at 3% interest and the property you purchase makes 8% income, then you are 5% better off in using the banks money.
Return on Investment
ROI is what most savvy investors look out for. You want to get your money working hard from day one. By using a combination of using the banks money, building in equity and gearing this can accelerate your financial wealth. For example, investor buys a property worth £100,000 with a £25,000 deposit and the price went up 10% in two years. That would achieve the investor 40% return on investment. If bought using ‘build in equity’ the ROI would be much greater.
Amount Invested £25,000
Return £10,000 (40% ROI)
Next Steps…
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