Property Investment Strategies

Before setting out to achieve something it is important to know exactly what you want, while it is also prudent to plan and set out a best course of action in order to meet that goal. Investing in property is no different. Before investing your hard earned cash you should know exactly what it is you are looking to achieve from your investment i.e.: an additional revenue stream perhaps by way of rental income, or maybe added value and capital appreciation. Once you know what you want to achieve from your investment in property, it becomes much easier to identify suitable opportunities that will give you exactly what you are looking for.

Below, we have identified several property investment strategies; all of which are potentially lucrative. However, personal circumstances and cash flow will dictate which is more suitable for you. There is an element of risk with every form of investment, therefore it is advisable to perform a suitable amount of research and due diligence before taking any decision in order to minimise the risk. Ask as many questions as possible and remember that “get rich quick” schemes invariably do not work.

The following property investment strategies can be broken down into two further categories: long term and short term. Longer term strategies tend to be more risk-averse, providing a much better chance of increasing wealth, gradually but safely. Shorter term strategies tend to be higher risk but do provide the added appeal of increasing wealth much quicker, in some cases almost overnight.

Top 5 Property Investment Strategies

1. Buy to let

The most common and most accessible form of property investment. Ideal for investors searching for an additional and consistent revenue stream by way of monthly rental income.

Variable term: The length or term of this form of investment will depend on how long you hold the property, which in turn will depend upon the returns on investment being achieved. The better they are, the less likely you are to move on or sell.

Variable risk: You attract what you are! The level of risk will usually be determined by the location of the property and the quality of tenants occupying the property. Be sure to buy in a safe and secure location, ideally a residential neighbourhood with good transport links close by schools, hospitals, supermarkets and other local amenities.

2. Buy to sell (“flip”)

Common practice amongst cash buyers, those with positive cash flow or significant capital available. This strategy involves buying ready property or off-plan property outright cash, usually at discounted prices or below market value with the aim of selling the property on in order to achieve added value within a short time frame. This practice is also known as “flipping”.

Short term: Quick turnaround possibly in the space of a few weeks, potentially a matter of days if a buyer is already lined up.

High risk: Potentially very profitable and lucrative, but as with all short-term strategies also very high risk. The market could crash leaving you stranded with a property you cannot sell, the potential buyer you had lined up could disappear and it may be difficult to find another to pay the suggested price resulting in your capital tied up longer than you intended.

3. Buy to hold

Another of the most common forms of property investment and one of the most balanced investment strategies in terms of investment term vs risk. Buying to hold has dual benefit. The idea is to purchase a suitable property in a location where there is high potential for capital growth.

Market research is required for this strategy to be successful. The primary objective is to hold the property for a period of time, 5, 10, maybe even 20+ years if required with the aim of achieving long term capital appreciation providing you with the option in future to eventually sell the property for significantly higher than the original purchase price providing you with a lump sum far higher than your original investment. During this period you could also potentially benefit from an additional revenue stream and regular rental income.

Long term: How long you hold the property will depend upon two things: i) the property market rising or falling, and, ii) your ability to wait out any storms and resist the desire to sell once the market is rising to avoid missing out on achieving peak market prices.

Variable risk: The level of risk will depend upon two things: i) whether you have carried out the appropriate level of market research and bought in an area where capital growth is highly likely i.e.: areas undergoing regeneration, or receiving heavy commercial investment, and, ii) The property market. Markets can rise and fall, capital growth is never guaranteed.

4. Buy to renovate to sell

Do the job that no-one wants to do! A popular investment strategy for cash buyers, those with good connections within the construction industry with access to competitively priced labourers, and investors who enjoy a little DIY and getting their hands dirty.

Usually properties are bought below market value at auction or privately, due to the properties being in a state of disrepair. The idea is to completely renovate and repair the property up to a good standard whilst spending as little as possible in order to add value. For example: you could potentially purchase a property for £50k, spend up to £20k correcting any issues, and that same property in the space of a few weeks could easily be worth £100k in the same property market.

Short term: Typically 3 – 12 months depending on the level of work required. Once all repairs have been made and the renovations complete, you would look to put the property back on the market and sell at a high enough price allowing you to recover all costs and turn a substantial profit.

High risk: Buying at auctions is a risky business, be careful not to bite off more than you can chew. You may end up buying a property that is in far worse condition than what you originally anticipated and this would eat into your selling on profits potentially making the entire exercise a waste of time. It is important to carry out any necessary surveys to establish the extent of any damage and prepare worst and best case scenario.

5. Buy to develop

If buy to let is the most accessible form of property investment, then buying to develop is certainly the least accessible. Usually a strategy adopted by asset management firms, trust funds and private property development companies.

The idea with this strategy is to purchase plots of land in desirable locations and to construct and develop from scratch, this could be commercial or residential property. Significant capital investment is required from the outset, with the ultimate aim to add value. In-depth market research is required to ensure success.

Long term: Involves the sourcing of land or derelict properties, planning permission subject to approval of local councils, the instruction of architects and construction firms to complete the build as planned. The entire process can typically take 2 – 3 years alone, after which point you would look to realise the added value gained.

Variable risk: The levels of risk again will depend on several factors: i) the location and the price of the land purchased, ii) the cost of the entire planning and build process, and, iii) the state of the property market once the build is complete. By adopting this strategy you are investing your capital now in todays’ market and predicting a favourable market in 2 – 3 years’ time.

Investing in property is a risky business, but it may be the best decision you ever make. We are here to help make the decision as easy as possible. To discuss any of the above investment strategies, or to find out which would be most suited to your personal circumstances feel free to contact us for a confidential no obligation discussion.