The key to successful property investment is to approach it in the same way as the professionals. Here, we present an overview of what this means in practical terms.
A recent report, published by the Economic Voice, suggests that the UK is one of the cheapest places for property investment1. Nonetheless, this alone does not provide the recipe for success. You need to choose your property carefully and have a savvy approach when it comes to your financials.
Nobody knows this market better than those who deal in property on a full-time basis, so what might they know that we, as yet, don’t?
Let’s consider, first, sellers’ motivation; fundamental to success is acquiring property below market value. For the most part, successful investors will consider who is selling the property, not just the property itself. So, who do you want to buy from? Well, certainly not someone who is comfortable and has the time and money to wait for what they consider to be the ‘right’ offer.
We’re looking for someone in financial straits. Perhaps they’ve missed a few mortgage payments and their credit is on the line. Maybe they are getting divorced and need to split the proceeds quickly. What these types of seller have in common is that they are open to an offer below market value. Come in low (but not insultingly so), and see where it takes you; don’t be shy to negotiate. Essentially, you are looking for a win-win situation, for example to help sellers avoid repossession, which can affect their financial standing for years to come, and for you to get a good deal. Always consider what the sellers want from their situation and see if your requirements tally.
Also consider how you are going to finance these properties. The professionals know that there is more than one route for this, so let’s consider four of the simplest options:
• Apply for a buy-to-let (BTL) mortgage where, for example, you would put in 25% of the purchase price and the lender would loan you the remaining 75%
• Cash purchase is where you – the investor – pay the entire price up front
• Partial private investor input – a private investor would, for example, pay the 25% deposit (£25K) and the remaining 75% (£75K) comes from a mortgage lender
• Total private investor input, whereby you get all of the money from a private investor, so to complete a cash purchase they would lend you the entire purchase price.
The critical element is not how you finance the deal, but how quickly you can recycle your money to start the whole process again. No matter how much capital you have, you will eventually run out of money. If you use a combination of funds from private investors and advanced strategies that enable you to withdraw all your money after six to nine months, you are free to go on to another deal.
Always remember, property is a long-term investment; you’re not going to make money overnight. However, if you have the wherewithal to invest in the future, you may well be setting the scene for your financial freedom.
Please keep an eye out for Part 3 in this series, which will consider the benefits of a good team approach.
1. http://www.economicvoice.com/uk-is-one-of-the-cheapest-countries-to-invest-in-residential-property/. Accessed 19 May 2014
If you want to know more about making property investment work for you, the Dental Property Club is hosting a three-day ‘Property Advanced Workshop’ on Friday 12 and Saturday 13 September, plus Saturday 18 October 2014, in Stevenage, Hertfordshire. This programme is designed to empower delegates with the cutting edge systems, skills and strategies needed for creating an invincible advantage in the professional property game. You can find out more here: http://bit.ly/1jXKiSO
The content of this article is for information purposes only and should not be relied upon when making financial choices. It is recommended you seek the help of a financial adviser to assess your needs fully before making any decisions and/or making changes.