Investing in property can be a life-changing experience, but it is also one of the biggest expenses of life. Not everyone is lucky enough to inherit a property, but with smart investment strategies and a bit of hard work, it is possible to turn one property into multiple properties and earn a substantial return.
Property investment is the purchase of a property with the aim of improving it for either resale or leasing. The options are diverse and can include apartments, family homes, garages, or plots of land.
Property flipping
The simplest way to invest in property is to either rent it out or sell it for a profit. The latter is known as “Buying-To-Sell” or “Flipping”. This strategy aims to buy a property at a lower price and sell it for a higher price, generating a substantial amount of cash in a short time frame. While this approach can be highly profitable, it also has its drawbacks. For example, the property does not generate a monthly income and profits are only realized once the project is completed.
Buy-to-sell investment funding
The funding for a buy-to-sell investment can be challenging. Mortgages are not ideal for flipping because they are designed for long-term rentals and lenders may become suspicious if they see a pattern of frequent property purchases. If you have the cash to pay for the property, it is a good option, but remember that all your money will be tied up in one investment, leaving you with no flexibility for unexpected costs. Bridging loans are short-term mortgages that are better suited for flipping projects, but they also comes with their costs. You will need to put in some of your own money, and the interest and fees should be factored into your budget to ensure the project is profitable after the finance costs and any other expenses.
The refurbishment or development of the property is another important factor to consider. There are two options for the refurbishment – hire a main contractor to run the project or hire individual contractors and manage the project yourself. The latter option is often more cost-effective, but it requires experience and good planning skills to avoid costly delays. It is essential to have a timeline, but it should also be realistic and account for unexpected events like missed appointments or delayed materials. Timing is especially important if you have a bridging loan, as you do not want to incur penalty interest charges.
When it comes to selling the property, it is important to make it look warm and welcoming. An empty property is not appealing to potential buyers, so it is a good idea to set up a few rooms to look “lived in”. You should also research the current market conditions and set a realistic price for the property. Overpricing the property will result in little interest, while pricing it too low will result in missed opportunities. If the property stays on the market for too long, it sends a message of struggling and may result in reducing the price. Once you receive an offer that you are happy with, it is essential to stay on top of all communications and ensure everything is in place to avoid delays.
To be successful with a buy-to-sell investment, you need to have a clear goal, a cohesive plan and a passion for the project. It is essential to research the market and set a realistic timeline and budget. You also need to be prepared to handle unexpected events and have a good understanding of the refurbishment process. With these factors in place, you can achieve success with a buy-to-sell investment and make substantial profits in a short time frame.
