Buying property is a dream for many, but most people think in terms of buying a house as acquiring a home rather than as an investment. But almost everyone with a little money in savings can make money on property investment in the UK.
Buying property is a dream for many, but most people think in terms of buying a house as acquiring a home rather than as an investment. But almost everyone with a little money in savings can make money on property investment in the UK. Here is how:
Lend Money to Property Developers
Essentially venture capital in a small way, small to medium scale investors are using property development loans as a way to make some money from property without having to raise enough cash to buy the property outright. A property developer needs cash in hand when building a block of flats, cluster of houses or row of terraces, and will often be amenable to sharing the ultimate profits with investors who can advance the funds to keep construction going.
Obviously, ensure that you have a legal contract and that your money is safeguarded before you commit your precious savings, but when this system works, it works very well as developers can make immense profits and can easily share a percentage with his or her investors. Once you have a good relationship with a couple of developers, you will be able to grow your money in a very satisfactory manner, even being able to plan future investments around current maturation dates.
Buy, Renovate, Sell
If you have a good reading on the property market, or it is relatively stable, this is a great way to turn a modest amount of savings into a considerably larger sum. Buy properties that are not looking their best (but do make sure they are structurally sound), fix them up over a couple of months: for example, invest in a new kitchen and bathroom, redo the floors and put on a lick of paint for a further small sum, and then reap much more than you have invested when you put the new look property back on the market. It is possible to make tens of thousands of pounds in a year by doing this.
Buy to Rent
This is what many people think of first when they think about investing in property: owning two houses and renting one out. It is an effective money earner in the long term, with much of the rent needing to go into maintaining and repairing the house as needed, so your return on investment will be fairly slow, but steady. Making sure that you get the right tenants in your house is a good way to ensure that your repair bills will be kept to a minimum, keeping your profits and your relationship with your tenants in good condition.
Tenants are usually young people or recent divorcees looking for a home while they save a deposit for their own home. They can range from the messy to the immaculately house proud, so it is worth your while to sound them out and see how well they are going to treat your house before you let them loose in it.
Buy to Short-Let
Holiday lets are a fantastic way to make a good deal of money in season – or year round if you own a property in a continually popular location. With this type of tenancy, you will probably need to be more hands-on, as the property will need to be thoroughly cleaned and maintained in between each guest’s stay. Short term leases can run for as little as one week and as much as six months, so if you have a lot of week or fortnight long leases, you will be quite busy. However, for both long- and short-term leases, you can hire an agency to take care of the administration, giving them a share of your profits to do the heavy work for you.
Holiday leases tend to be for considerably more than long-term leases, more on a par with hotel stays. They are favoured by families who want a home away from home, and those with dietary restrictions that would make a hotel stay awkward and uncomfortable. They are also preferred by people on short term work contracts, so they have a home base for the duration of their contract in handy commuting distance to their temporary workplace.
Buy a Hotel Room
This method of property investment is both quite old and fairly new. In days gone by, people would ‘buy’ a hotel room to be certain of getting their favourite room when they travelled about, say two or three times a year. In between times, the hotel could rent the room out, and would make a good profit on the room, which paid for the cleaning and servicing of the room when the owner was in residence. Any cash left over would be divided between the hotel and the owner at a previously agreed percentage. This worked something like timeshare holidays with the owner fitting their own holiday needs around those of their guests, but having their holidays pretty much paid for by the profits of their investment.
This somewhat old-fashioned idea fell out of favour for many decades, but has recently returned. Assume you have a modest sum of money that you do not need right now, but will do in a few years’ time (for example, for a child’s coming of age, a new car, a wedding, or some other expensive item or event). This is invested into the hotel, who then treat the room as they normally would do: hiring it out, cleaning and maintaining it, and redecorating it as needed. From the proceeds of the hotel room’s hire, staff wages, utilities and any other overheads are deducted. The balance is paid over to the investor at the agreed upon intervals which can be monthly, quarterly or annually. Your dividend can be reinvested if you want, or you can put it into a high yield savings account, whichever pays out the most when you need the money.
These are just five ways in which you can invest in property in the United Kingdom. Assess the pros and cons of each when it comes to your preferences for investing your money and see which will work best for you.