The Best Property Investment Strategies
Last updated 19th May 2021 • JaeVee Marketing • JaeVee
Generally speaking, anyone can begin with buy-to-let and house flipping property investment strategies.
Usually, only those who have had a knee deep in the property game will be able to leverage their experience and diversified assets to form partnerships, release equity, source deals, develop new-builds and lead or support large-scale developments.
Taking the property game seriously can be life changing, for better or for worse. It's no place for mistakes, so there is only one way to become a professional property investor and that is to start like one:
- Get into Property Investment for the First Time
- The Best Property Investment Strategies
- Fastest Ways to Become a Property Investor
- How To Protect Yourself When Investing In Property
- The Top 7 Mistakes To Avoid As A Property Investor
- Overview of the Property Market
- Finance Options for Investors
- Advanced Assets
How to become a property investor
The best property investment strategies
How to Buy to Let
Buy to let or 'vanilla buy to let' is the most popular and traditional property investment strategy.
This is where one would buy a property with the aim of letting it out to tenants, hence reaping the benefits of investing in rental properties by generating an income over a long term period.
This is one of the best property investment strategies for those who are just starting out, and most of all those that have the funds to put down a deposit or can buy outright.
Find out more:
How to Buy to Sell (House flipping)
Similar to buy to let, you buy a property, add value to it and then sell it on for a profit.
This is one of the most profitable property investment strategies when done properly, although it is reliant on the property market.
A broad knowledge of selling properties will teach you the general best time to sell.
This is an essential skill which you will pick up over time as a property developer, but in the mean time - to avoid costly mistakes - always seek advice before making any irrational moves.
Find out more:
How to form or join partnership investments and joint ventures
You may possess the skills but not the funds to leap into the world of property development.
A partnership investment is where two or more parties come together on a property investment.
The risk is shared, and you normally go in with each party bringing something different to the partnership which makes it one of the best property investment strategies.
Find out more:
How to recycle your original deposit by releasing equity
One of the best property investment strategies is where you take your original deposit and then reinvest it again so it can be used for multiple properties.
To do this, you buy the property, refurbish it, increase the value and then re mortgage it.
You then take the value of the original deposit and refurbishment costs out and reinvest.
This strategy is not for a first timer as it does need a lot of experience and managing costs and finance knowledge.
Find out more:
HMO - houses with multiple occupancy
This is rapidly becoming one of the more popular property investment strategies and has the potential to generate multiple healthy rental yields which are comparably higher than a normal buy to let.
There are slightly different rules and more costs involved, such as shared facilities and utilities to factor in, but the potential income on offer makes it a very worthwhile investment to get involved with.
Social and affordable housing
With spiking homelessness and the UK’s new social and affordable housing regulations and homeless Reduction bill this is quickly becoming one of the best property investment strategies.
It will involve working with social services, third party agencies and those on a low income and universal credit. It is a hands on strategy with deep involvement for the landlord but it is profitable and adds social value to investments.
Whatever strategy you go for, we advise you to do your research and cater for all eventualities.
How to source property deals / trade leads
There are ways to get into the investment sector without putting large amounts of money down.
A great way to build your income is to trade leads with other investors. For this you would need to know a good property deal when you see it, and be in frequent touch with the market sellers who would notify you.
You would then sell on the ‘lead’ to an interested investor. The more work on the lead, the more money you can charge for it.
This is fairly risk free which makes it one of the best ways to earn a quick buck in the property development game, however, you would need a fair amount of experience and time to dedicate to this strategy.
How to Get Into Property Investment for the First Time
If you would like to become a property investor, whether it be for a pension plan, to supplement your current income or as a job replacement but do not know where to start, this beginners investment property guide will help you on your way.
How does a property investment strategy work?
To summarise; A property investment works by generating a higher return, in the form of a lump sum or a monthly income, as a result of the time and equity you have put in to complete and exit from a feasible project.
In the common case of requiring time and equity from others, the project must generate enough revenue to cover the costs of labour and interest, accumulated within the set terms (typically 18 - 60 months) to ensure you still turn a profit.
To build up a large and profitable property investment portfolio as fast as possible, you will need to diversify your assets and exit strategies.
Diversification reduces the overall risk from the slumps of the property market, that diverges from being in more or less benefit of your assets periodically. That is to say, the more diverse they are, the more likely a slump will be partial and durable to your overall portfolio.
The property market is on a gradual upward trend, so as long as you can hold on to your assets, you will have opportunities to exit on select assets at the best time to achieve the maximum profit.
As a beginner property investor you may not realise that not many investors will buy a property in their own name.
Instead they will do so via a limited liability company or limited partnership, this protects your personal assets if you lose the money you have invested.
Buy Property Based on Research
It has been found that people are ruled by emotion when they invest in property, but you must buy property based on analytical research and sticking to your ceiling numbers.
First on our beginners investment property guide is to answer the questions like; will it provide the expected returns?
Is it the best location?
Will it appeal to the owner occupier market that sustains in the long term?
Paying due diligence and doing your research is one of the ways to begin your investment property portfolio with the right step.
Plan, Plan, Plan
When you realised you wanted to become a property investor what was the reason?
Was there an end goal or income?
Are you in it for the short term or long term when you invest in property?
What type of property do you want to manage?
Answering these questions will allow you to have a clear and focused investment plan which will help you make the right choices along the way.
Rushing into a property investment without the full facts could be as disastrous as standing by idly in a bid of being cautious.
You must quickly find a middle ground and fully immerse yourself in the investment process to grow and learn from it.
If you feel you are in too deep, then seek professional advice to guide you as a beginner property investor.
Can You Afford The Investment?
You’ve done your homework, found the right property and are ready to invest but have you answered the most important question of all?
Can you afford this investment? If you cannot invest outright with your own money, can you borrow the amount needed?
Will the investment generate enough income to cover your outgoings or if something goes wrong?
As a beginner investor you need to learn the ropes when it comes to managing your property investment portfolio.
You may feel as though with an investment under your belt you have a handle on it, but what about if you add 2, 3 or 4 more can you still self-manage your portfolio?
Ongoing management can be time consuming and it may be necessary to seek professional help.
How to Protect Yourself When Investing in Property
Before you invest some of your hard earned cash into a property, it is essential to do your homework.
Carrying out your due diligence could be the difference between you receiving high returns on your investment or being left with a property that has a minor margin to make profits on the rental yield, making you a loss.
One of the ways to protect yourself when investing in property is to research the property market. You can notably the location of the property and look at the future capital growth in the surrounding areas.
- Are house prices dropping and is there a good rental yield in the area?
- Is the location up and coming with new developments planned or is it nearing the end of its life cycle?
Being aware of the worst case scenarios and risks will help you prepare for them.
Speaking to lettings and estate agents in the area will also give you some valuable information to help protect yourself when making your investments in property.
Make sure you know what tax will apply, and how much insurance you will need to cover yourself if things go pop. (Read our article on Stamp Duty Land Tax.
Research and relationships
Just like a property developer has to carry out their due diligence on a project and ensure that all the numbers add up when it comes to the crunch, one must protect them self as much as possible when making an investment in property.
If you're looking to invest with a company; put some time aside to carry out some research on the company who will be managing your investment.
- Do they have a proven track record of successful property completions?
- Are the returns realistic? Is it pie in the sky?
- How does the companies reviews stack up in the industry?
- Have they always paid out?
- Have they had any bad years or made a loss?
These are essential questions that you should be asking in order to cover yourself and mitigate the risk involved when investing in property. .
Diversify your portfolio
One of the ways you can protect yourself when investing in property is to diversify your portfolio.
If you have investments in different types of property, buy to let, commercial, residential in different areas then if the worse was to happen and you had a low performing property, the other properties which are maintaining performance would act as a financial buffer and soften the blow.
Capital City locations will have higher rental yields, and may be likely to outperform those in other areas, which will help minimise the financial risk should something like loosing your job, not being able to rent out/ sell the property, or if interest rates increase.
Making sure you have the correct and necessary insurances is another way to protect yourself when investing in property.
If you plan on letting the property out you will need landlord insurance which will protect you if the tenant cannot pay or the property sits empty.
You need to make sure the renter’s have their own insurance to protect their belongings so if there was a fire or flood they could make a claim on their own insurance rather than yours.
The property itself will need to be insured, some mortgages come with landlord insurance but we would advise you seek council from a professional who can tell you exactly what you need.
Being insured for the majority of eventualities will help mitigate the effects of risk.
To secure yourself from risk make sure you have not been negligent. If a tenant gets hurt in the house due to something you knew about they may be able to sue you.
Keep the house clean, safe and well maintained and you will find your tenants will reward you in the long run by staying in the property and providing you with long term rental yields.
Don’t cut corners to keep on budget. Ensure you have all of the correct insurance should a major structural fault occur or acts of God such as a flood.
You don't have to own property
There are ways to invest in property without buying one and thus protect yourself. You could look to trade property leads and sell them to investors, look at sourcing property and selling the deals on, or to reduce the risk you could invest as part of a joint partnership.
There are other ways to invest such as JaeVee's equity platform, have you taken a look?
The Top 7 Mistakes to Avoid as a Property Investor
1. Sitting on the fence
Almost all of the worst practical mistakes can be corrected or learnt from experience.
But this involves a whole mindset that needs changing.
You can’t turn your dreams into reality just by dreaming them. You’ll need to take action.
You owe it to yourself to have a rough plan and create your own concrete goals. SMART Goals that take into account your lifestyle and financial aspirations.
Whether you read up on lots of posts like this one, watch as many YouTube videos as you can get your hands on, or sign up for a course like ours, it’s an act of bravery and wisdom to leap off the fence.
Just make sure that once you’re in the investors seat, you carry this wisdom forward.
It’s essential to do due diligence, but be wary of over analysing every situation to the point that you can't get your projects off the ground.
Anyone who wants to be an investor shouldn’t be scared of risk. Without risk, there wouldn’t be reward.
No property gets made by people waiting to begin.
Investing is all about taking a calculated leap and being prepared to deal with whatever problems may come up.
You can’t prepare for every possible outcome.
But you can build a resilient mindset that means you will be able to take whatever happens in your stride.
2. Going it alone
Since there’s plenty of high quality courses and information online it’s easier than ever to believe all you need to start your journey is an interest in property and your wits about you.
But while it’s always good to be ambitious and independent, no one lasts long in this game alone.
Even when you’re studying the basics, you don’t have to limit your learning to the confines of your room.
As well as using the hundreds of free and paid for resources online, you should always look to get words of wisdom for free.
Surrounding yourself with experts is both invaluable and inexpensive - you could simply search through LinkedIn and connect with local investors.
You could set up a Skype interview or even offer them a coffee to talk over their expertise with.
Learning from them and their mistakes is perhaps the most valuable way to avoid making your own.
Let’s not forget that building your own professional team is essential for every investor.
You’ll need to create great relationships with at least one estate agent, a mortgage advisor, the architect, builders, insurance advisers and many others.
And don’t forget the remodelling and maintenance - your plumber, electrician and other contractors are also necessary.
Everyone’s necessary, from your mortgage partner to your cleaner.
You’ll need all the help you can get - and you’ll never build your business if you have to spend your time mopping up leaks alone! You might think you’ll save by cutting a few costs on personnel.
But this is quite literally a false investment.
Not using professionals will cost you so much more in the long run. There’s no use saving in the short term if it will only make your property less enticing for your potential tenants. The property professionals are fully trained and qualified. They spend their working lives perfecting property developments.
Why wouldn’t you want to use them?
3. Thinking it’s a get rich quick scheme
The more unscrupulous people in the industry often sell investment as a get rich quick scheme.
There have always been plenty of ‘gurus’ who make infomercials that make property investment seem an easy way to make money on the quick.
And with house prices still at a steady incline despite Brexit, it can seem that all their too good to be true posturing could actually be true.
That’s why it’s important to make sure all the information you’re getting is balanced and mentions the pitfalls as well as all the potential. Property might be a great investment, but there are plenty of good opportunities - and you need to work hard at all of them.
Hard work is always the kicker for if you do well in any type of business. It might not always pay off immediately, but it will certainly see you better in the long run.
You have to be willing to put in the effort on a daily basis, and you have to make intelligent decisions, and figure out your risk tolerance.
But you have to avoid the temptation of listening to the gospel choir, whether you’re looking into this business as a retirement investment, or you’re fresh out of education and looking for a lucrative industry.
Whatever investment you’re starting off with, you shouldn’t buy blind.
You wouldn’t buy shares in any standard company without thorough research first - why would property be any different?
Take a good hard look at all your investments and their potential to seal your chances of success.
It’s also all too easy to follow market trends.
But make sure when you’re researching them, you always look with a critical eye, and try to measure how it’s performed over a good few years, not just in the year you’re looking to invest in.
Make sure you view the bubble from all sides, just in case it bursts. It follows that a fast rising market can also fall fast.
Make sure you’re making investments off your own intelligence, rather than just following the crowd.
You also have to prepare a number of exit strategies outside of just selling or renting.
For example, if your plan A is to flip (buy, refurbish and sell) the property, then your plan B could be to offer a lease purchase to a buyer or wait and rent it out. Plan C could be to sell the property wholesale.
4. Not doing the maths
This might seem like the most obvious one on the list. But when you’re looking for high quality professional advice make sure you don’t pay too much for it.
Avoid anyone making big promises for a ‘small fee’ and instead go for proven professionals who will give you measured advice for free or an industry standard price, depending on the nature of your advice.
You’ll want to invest quickly, so you don’t see potential properties dry up.
But you shouldn’t pay over the odds for the first good deal you see.
You’ll naturally want your builders to get your property up on the market as soon as possible - but make sure that you’re not paying more than what’s fair just to get a quick turnaround.
Paying too much is the reason that investors get surprised with the nasty shock of not making any profit.
Going thoroughly through the numbers is crucial to work out how profitable your investment could be.
You should identify any potential risks to your bottom line and work out mitigation strategies for anything that could undercut your profit potential.
Your investment should be thoroughly stress tested - remember to factor in other costs and losses such as void periods, stamp duty, letting agent fees and maintenance.
You’ll also have to have sufficient cash flow to cover maintenance if your preferred strategy is to buy, hold and rent the properties you invest in.
Of course property managers are a good investment, but in order to get the best value for your money, you’ll have to research how they work and even interview a few in the flesh.
5. Location never lies
The location can make all the difference.
It’s no use investing in the most amazing property on the block if the block is somewhere no one wants to live.
There are plenty of ways to assess the area that you’re looking to invest in.
You can read up on news reports and try to track down any similar investments happening in the local area.
But don’t forget how important local knowledge can be. You can understand the area better by speaking to estate agents and locals alike.
This will give you vital information on the areas that people most want to live in, so you can invest there.
It's generally a good bet that most potential tenants will look for some combination of these:
- A quiet area
- Commercial amenities
- Convenient transport
- Good schools
However, as long as you know the property has good rental potential, and the investment numbers all make sense, you don’t have to tick all the boxes.
Another pitfall to avoid is getting started by investing in property in an area where prices are starting to fall. Think twice. Your property should always have good potential appreciation in the coming years.
You might think you’ve done enough research to ensure that you know the prices will pick up again, but there are no guarantees in property.
It’s also a good idea to check the current and projected population and their average income.
If there are not enough potential buyers willing to buy at the price you need, then prices will usually keep dropping.
Instead you should always look for areas where demand is growing faster than supply so that prices can be pushed up.
6. Putting your heart before your head
At its heart, every house needs the potential to become a home - and when you’re looking through the eyes of your potential tenant, this is definitely something to consider. But when you’re back in the investor’s chair, it’s all back to the facts.
It’s all very well falling in love with a place, but there’s no use sinking your money into a problematic property with ‘character’ unless you’ve been reassured about the potential gains.
After all, you won’t be the one living there!
Don’t let your emotions leave you out of cash.
It also goes the other way!
Just because you might have some nitpicks with the decor - which will be changed anyway - you shouldn’t walk away from an investment with great potential.
You have to keep an open mind.
How cost effectively and quickly can you add value to the property.
Is there anything you won’t be looking for, but that your potential tenants will crave?
Property is highly likely to be the biggest and most expensive asset you’ll ever purchase - so put the bottom line first to avoid a nasty fall.
Stick to cold hard facts, its an investment decision and should be based on your budget and the return it can provide.
7. Don’t stop thinking strategy
There’s no denying that property is a risky business. But if you can never completely cancel out that risk, what can you do?
It’s all about your strategy.
If you’re interested in investing in buy to let, then timing will be everything. If you want to live off the profits of your property, then you’ll need to maximise your rental income so that you can ride out market fluctuations.
There’s also an element of anticipating and planning for problems so that you can control the damage if and when they happen.
There are various factors which could suddenly turn a profitable property into a liability that just produces a negative cash flow.
Have a close look at interest rates, for example - large rises also increase monthly mortgage payments, which reduces your potential gross profit.
Another thing to consider is the likelihood of a property market crash.
Although all the latest prophecies about Brexit, per say, have so far been proven to be more doom and gloom than based in reality, nothing’s certain.
Once your building is on the market and all the deals are sealed, you can’t just rely on the property to take care of itself - the hard work’s not over yet!
The property is your asset, and as such, it’s yours to take care of. Make regular inspections and keep on top of maintenance.
*Please note this blog post is not to be considered as investment advice. We recommend you seek independent financial advice and conduct your own due diligence before making any investment.