What Property Investment Strategies are there?
Property investment is a world of opportunities, offering many different options and routes, allowing you to tailor your investment, strategies and portfolio to suit your experience and objectives.
Throughout our years in the property investment industry we have learned there are four investment strategies that present themselves as most popular amongst both new and experienced investors.
Each investment type brings its own advantages (and unfortunately disadvantages) meaning choosing the right one for you is vital.
Our first piece of advice before selecting which investment strategy to choose would be to consider both your short term and long term objectives and evaluate how this investment will affect these.
Flips are a hugely exciting property investment, bringing the potential for quick and high ROI.
Flips involve finding and purchasing a property below its market value - already allowing you to work at a profit. Purchasing at below market value frees up part of your budget which can now be allocated to your renovation.
There are a range of benefits that come with purchasing a flip investment, the main benefit being the profit generated.
With a flip investment there are less responsibilities to focus on. Flip investments eradicate the responsibility of tenants and letting fees, perfect for those who are time poor.
During the renovation phase, however, there can be unexpected costs or surprises, therefore, it is important with flips to have extra budget to hand.
Buy-to-Let investments are widely popular, however, particularly among new investors. Buy-to-Lets are a great and safe first investment as they bring the benefits of earning a monthly income and whilst increasing your capital.
Many first time property investors choose to invest in Buy-to-Let properties as a result of the variety of mortgage options available. Meanwhile, this is often paired with low deposits, easing new investors into the investment world.
Alongside this, Buy-to-Let investments are a secure option as they offer limited void periods. As a result of a lack in void periods, investors often experience continuous monthly cash flow from their property.
This style of investment strategy works well for investors as, apart from organising the odd maintenance job, they require low management, allowing time and energy to be focused elsewhere.
You’ve got to take the good with the bad and accept the small number of disadvantages that come with this great property investment strategy.
While your Buy-to-Let property requires little management once tenanted, there are numerous legislations to abide by and it is up to you to carry out your due diligence and ensure these legislations are met.
Legislation can often vary in different locations, meaning staying up-to-date is crucial, failure to do so could have severe consequences on your investment.
Another thing to consider when opting for a Buy-to-Let investment is they potentially provide lower yields than other investment types.
When choosing a Buy-to-Let investment it is important to remember that there are fees to consider. When working with a letting agent you can expect to pay at least 15% of your profit to their fees.
Think Airbnb and you’ll be able to visualise serviced accommodation as an investment strategy.
Serviced Accommodation is a home from home style, usually suited to business people or contractors travelling for work.
This style of investment allows investors to earn high profits when operating at maximum rental. An advantage of a serviced accommodation is the flexibility it presents for landlords. Factors such as location, size etc can allow landlords to increase or decrease pricing, this can even be implemented on a seasonal basis.
Whilst serviced accommodation investments are a great option, market supply can be limited, meaning you need to be ready when they become available.
This style also requires more management surrounding your property. With tenants changing with each rental cleaning is important - having a cleaning team is hugely beneficial to ensure standards and requirements are met.
Adding to your team for the running of your property can add to the costs of your investment, therefore, it is crucial to bear this in mind and allocate budget accordingly.
HMOs (House of Multiple Occupants)
House of Multiple Occupants investments produce significantly higher monthly returns. This style of investment rents each individual room of a property to multiple, non-related tenants rather than the property as a whole to one family.
This style of investment often allows investors to earn double what they would with a Buy-to-Let.
HMOs are largely popular in areas populated with students as - you guessed it - they make perfect student accommodations.
While landlords may risk experiencing void periods outside of term time, this investment style is not typically tenant reliant.
Despite the high turnover of tenants, landlords can usually expect to have at least one room rented, securing a monthly profit.
HMOs, however, do come with higher costs and more legislation.
When owning/operating an HMO you are expected to follow and remain compliant with legislation, therefore, due diligence is highly recommended.
Whilst bringing its perks, being an HMO landlord can present higher deposits as well as other costs. As a result of having more tenants the upkeep of maintenance and risk of damage increases, consequently resulting in higher running, upfront costs.
Due to legislation and responsibility this style of investment is often preferred by experienced investors rather than first time investors.
Multiple investment strategies bring multiple options for you and your portfolio to meet objectives.
Flips are great for cash rich, ambitious investors. Whilst they are large projects, they bring solid profits and make a great addition to investor property portfolios.
Buy-to-Let investments are great for both first time investors and experienced investors as they work perfectly as a side income whilst increasing capital growth.
Serviced accommodations are a great way to earn through the selling points of a property, i.e. location, size etc.
If your property is located in an area loaded with students then HMO is the perfect option - if in line with local council legislation.
Disclaimer: This is information based on our knowledge gained throughout years of experience, education and learnings. This information is open to interpretation, therefore, you must carry out your own due diligence regarding the subject.