The common perception of a property investor is of a landlord, who buys houses or flats outright and then rents them to tenants. While this strategy is one of the more common ways to approach the industry it is just one of many available property investment strategies in the UK.
Property investment strategies:
Auction properties
Properties can be listed at auction for any number of reasons; they could be repossessions, have niche appeal, require renovation, or be the property of a seller short on time. Whatever the reason, auction properties can present a serious bargain and are often a goldmine for discerning investors. You will, however, need to pay close attention to a myriad of legal paperwork, determine a maximum bid, and arrange a mortgage beforehand. If you are prepared to do that legwork, though, there’s potentially a lot of money to be made in auction properties.
Short lease
Flats with a short window of time left on their lease can be acquired at a steep discount due to lenders’ wariness around them. If you acquire a short lease flat, you can, after two years, apply to have the lease extended. Doing this will increase its market value and, in conjunction with any renovations, make it far more attractive to prospective tenants.
Repossessions
When homeowners continually default on their mortgage payments, their property falls into the ownership of the mortgage lender itself. To recoup their costs as fast as possible, the lender will look to sell the property at an often incredibly modest price, so this could be one of the most lucrative property investment strategies in the UK. Typically, a steep discount suggests that there is an underlying issue with the property, but with repossessed properties, there is likely no issue at all and therefore little renovation work to be done.
Licensed HMOs
An HMO (house in multiple occupation) is a property with two or more occupants not forming a single ‘household’ unit. This includes shared accommodation, bedsits, hostels, and care homes. If there are five or more occupants forming two or more separate ‘household’ units in a property, that property must be licensed with the relevant authorities. Therefore, if you’re a landlord looking to buy and rent out an HMO, investing in a pre-licensed property can save you a significant amount of hassle.
Flipping
Flipping (i.e the buy-refurbish-sell method or property trading) is a short-term investment that involves buying a property, increasing its value through renovation, and selling it on.
Value can be added in a number of ways. There might be internal refurbishments such as plasterwork, modernisation, improvements on electrics, plumbing, or even just decoration that can be carried out. Another way to increase value could be building an extension.
Or a more legal route might be one to take, securing a change of use or getting planning permission in place before selling on can also increase the value of a building.
And finally, there is space efficiency. Turning a one-bedroom apartment into a two-bed can increase its value, as can converting a garage into an extra bedroom. Likewise, turning a larger house into flats or an HMO can be a great way of increasing value.
Buying a property to then sell after making improvements and changes, whether small or large, is a common way of making money in the industry.
Buy-refurb-leverage
This simply refers to the act of buying a property in need of refurbishment, significant or otherwise, and reselling it at a significant profit. It’s a rather simple investment strategy, but if you’re willing to put in the appropriate amount of labour, it can be exceptionally lucrative.
Biggest bargains
Sometimes property owners are desperate to sell their homes because they may be short on time, have struggled to attract buyer attention, or are victims of a sale breakdown. When this happens, sellers often dramatically reduce the asking price of their property, meaning that you can swoop in and grab yourself a bargain. With some renovation, refurbishment, and a solid remarketing effort, you can resell or rent out the property, achieving greater success than the original owner ever did.
Cash offers
Properties listed as “cash only” mean that the seller is only interested in buyers who can pay for the property upfront with no mortgage. There are a number of potential reasons for a seller wanting this, ranging from the simple, the buyer wants a hassle-free sale, to the concerning, severe flaws in the property which make it ineligible for most mortgages. If you have a significant pool of cash lying around, you’ll have a major advantage in negotiations for “cash only” properties. Be warned, though, this is an inherently risky venture, and it’s important to understand why the property is only open to cash offers as there could be an underlying flaw with the property that renders it a poor investment.
Planning approved
If you’re looking to buy a property and subject it to major renovation work, such as extensions, repaving, or outbuilding construction, you’ll need to acquire planning permission. This can be a time-consuming process, taking anywhere up to 2-3 months. If you’ve got a construction team ready to go, or if you just don’t want to wait, buying a planning approved property can save you a whole lot of needless hassle.
Deal breakdown
It’s one of the unfortunate realities of the property market: deals can break down. If a buyer backs out of a sale at the last minute, the seller can be left in a precarious position, desperate to sell their property as fast as possible and continue with their own subsequent property purchase. That’s why properties that return to the market following a deal breakdown can be so cheap; there’s likely nothing wrong with the property, but the owners need a sale as fast as possible. Jumping on properties like this can be great for investors that want a cheap property without the flaws commonplace in a cheaper property.
New builds
Newly-built properties, flats, or houses that are being sold directly from the property developer, are incredibly enticing for would-be tenants. Due to this, investors can typically charge relatively high rental rates resulting in greater profits. Plus, as mentioned, new builds come straight from the property developer themselves, meaning that there is no chain and therefore minimal waiting associated with the sale.