There are a number of different strategies out there for anyone new to property investing. And, just like any other sector or business, some property strategies are more complex – or expensive – than others.
And that’s why, in this article we’ll restrict it to property investment for beginners. In other words, people who have never invested in property before (apart from their own home) but are keen to kick start either a part-time or full-time career in it.
So, when it comes to property investment for beginners, we would suggest a few of the best strategies out there are buy to let, property sourcing and joint ventures.
Buy to let property strategy
By far the most popular strategy for anyone looking to dip into the property market for the first time is rental home investment (buy to let). This means buying a property and renting it out to tenants. The idea being that the rental income pays off all costs involved with the property. This includes mortgage payments, possible repairs, a couple of void months and any ongoing maintenance costs, i.e. for cleaning a shared stairwell, grass cutting etc. You’ll also need to factor in tax costs.
Rental home investment is a good strategy for those who can afford to put down a big deposit and have a decent credit rating, to allow them to access finance in the first place.
You can tell whether a property will prove a good investment by working out yield on rental property. This is the rate of return you can expect to achieve. To get the yield figures simply divide your expected annual rental income by the property’s purchase. Once you have that, multiply by 100, so that it’s a percentage.
A property which costs £180,000 to buy, for instance, may bring you a predicted annual rental income of £9,000. Your yield would then be (£9,000 ÷ £180,000) x 100 = 5%.
Property sourcing strategy
Property sourcing is about finding good properties for investors to purchase as a rental home investment. It involves negotiating with vendors, then selling it onto an investor as a ‘packaged deal.’ It could be that the properties already come with tenants or they can be refurb projects – whatever an investor is in the market for.
The sourcer makes their money via commission from the rental home investment ie by taking a percentage of the deal (it could be two per cent of the cost of the property, or an otherwise agreed amount). It’s an excellent way to make money quickly without taking any risk with your own finances.
Those who enjoy researching and networking and are good at negotiating will excel at this type of property strategy.
Joint ventures property strategy
A Joint Venture strategy is where a property newbie teams up with another individual willing to lend them the cash to carry out a refurb project or similar. Once the property has been brought up to scratch, it can then be rented out to tenants, with both parties receiving rental income (the percentage having been worked out at the beginning of the deal).
The reason the time-poor financier will provide the cash is because, after working out yield on rental property he or she recognises a good investment deal and is confident the ‘partner’ has the skills to accomplish it. It may be that the individual providing the financing also has good contacts in the industry, or vice versa, so that often one deal can lead to others.
In the end a partnership is usually formed. This can take time, however, until each individual learns to trust the other and know they can work together well. Like sourcing, a joint venture strategy is one where very little cash is required upfront, making it an excellent investment for beginners.
Training for a career in property
Like any new industry or sector an individual decides to concentrate on, it is important to understand the basics, i.e. what the marketplace is, how it works and who to follow as a mentor.
It is possible to learn via reading various books and taking courses in the subject, of course. But, by far, the best way to learn is by ‘doing’. And often that means having the confidence, networks and finance to be able to go ahead in the first place. Certainly, that’s the case when it comes to most property strategies.
At Sourced we have a team of experienced property investors, who are familiar with every property strategy there is, including HMOs, large-scale property developments and investing from overseas etc.
Join Sourced franchise
By becoming a Sourced franchisee, you get direct access to the Sourced team – all of whom act as mentors when it comes to property investment for beginners. There are courses in just about every property strategy that franchisees can take. A big plus with joining the Sourced network is being able to access a number of property leads and investors. And, to make sure, you can carry through with your home return plans, you will also be able to borrow money for profitable deals via our own Peer to Peer Lending platform.
Get in touch
Property investment for beginners can be exciting. After all, nine times out of ten the property returns will far exceed that of stocks and shares or bank savings. To find out more about how to start investing in property, download our Sourced franchise prospectus today.