When you consider investing in property, it’s easy to think “I haven’t got enough money to even buy my first house, let alone invest in property.”
Traditionally, investing in property is seen as a very expensive business.
After all, you’ve got to find the money for the deposit. Then you’ve got to cover the fees. Plus, you need a good credit score to obtain the loan or mortgage in order to purchase the investment. If you don’t have those things in place, then really, what’s the point?
How Can I Invest in Property?
Perhaps you’re thinking, “Property investment sounds great Nikki, thank you. But I’m not very interested, because I don’t have the money for that.”
That’s absolutely understandable. Because yes, mostly you do need a significant injection of finance. However, you can invest in property without huge amounts of money. Keep reading, as I’m going to explain how you can make that possible.
Let’s look at the two main options available to you if property investment is something you want to get involved in.
Investing in Physical Property
When it comes to investing in physical property, you need money, time, or a combination of both. There are a few resources I can point you in the direction of, so you can start learning to do this yourself.
Buy-to-let is a popular property investment option most of us are familiar with, and some people become property owners by chance. For example, perhaps someone in your family has passed away and left their property to you — and the only option is to rent it out. Suddenly, you’re an accidental landlord.
But there is an art to buy-to-let investing; there’s more to it than just taking on someone else’s house and letting it. It comes down to location, and whether that type of property is required as a rental in that area. Is it at the right price? Can you maintain it? How are you going to maintain it?
Also, think about the logistics. There’s no point buying a property in Scotland because it’s cheap, but you live miles away. If you live in London, it’s not great if you have to commute there every week if there’s a problem. These are things you need to consider.
The second option you could consider is holiday rentals such as Airbnb, or you could set up your own business renting out a flat — purely for holiday lets. It’s a bit like buy-to-let, although the tenants only stay for short periods of time. This is something I’ve done myself.
The difficulty I had was finding a cleaner who would go in and clean the property between tenants. Understandably, cleaners like to have regular income every week. It was difficult to find one who was willing to come in ad-hoc, without charging huge sums of money. It just wasn’t viable.
So, it comes down to location, how often your changeovers will be, and how much a cleaner might cost. Is it going to be financially worth it? Of course, there are companies out there who will manage your holiday let for you, from getting cleaners involved, to making sure the property is properly maintained.
Ultimately, it’s got to be a property that’s viable. Are you able to rent that property out for hundreds of pounds at a time, or is it going to be “cheap as chips”? If it’s the latter, you’re probably going to have to manage most of it yourself. It does take effort. It’s definitely worth looking into though, as it’s a way of investing in property — without huge amounts of money.
Creating an HMO
In case you’re unfamiliar with the term, an HMO is a House of Multiple Occupation which has 5 or 6 rooms. As the proprietor, you would turn each room into self-contained units. For each room you rent, you’ve got multiple sources of rental income than if you just had one tenant.
It’s important to note that there’s a lot of regulation surrounding HMOs. You can’t simply turn up, create a house of multiple occupation and expect everything to be fine (that’s illegal!). You have to make sure you know about any relevant rules in the local area to avoid potential issues. There is a great deal of learning required around developing HMOs, as lots of things could go wrong. But ultimately, it’s a great way of earning an income.
Commercial Property to Residential Property Investments
This method is much more high risk. Converting commercial property to residential property involves purchasing an existing building and turning it into multiple flats. You really need to have a strong footing in the property world before committing to such a major development. It’s doable, but you need a good backing. Again, it comes down to money, time, and the right location.
If you want to learn more about property, there are plenty of networking meetings you could attend. There’s the Property Investors Network (or PIN for short) or you could join PPN meetings (Progressive Property Network). These organisations have plenty of courses and books on offer, for a fee.
Here, you can find mentors to help you become a ‘connector’. A connector locates a property that the mentor wants them to find. As long as it fits the criteria, the mentor will buy the property, while giving you a cut. That’s certainly something you could get involved with, for very little investment.
As you can see, in terms of physical property, there are lots of things you can get involved in. They are not easy – it’s something I’ve tried myself! It takes time and it takes a lot of effort.
You’ve got to take it seriously; it’s not something you can do half-heartedly. You have to throw everything you’ve got into it because there’s so much competition out there. But, if you have the option to do buy-to-let, or one of the options I’ve mentioned here, absolutely go for it. Because it will be worth it.
Property Investing through Shares and Investments
Investing in Property using Stocks and Shares
When investing in property through stocks and shares, you don’t physically have to source the property. The stocks and shares companies — called REITS (Real Estate Investment Trusts) — do this for you. Instead, you’re investing money into the companies who own and manage property. You’re able to get involved in the world of property by putting money into investments that do the work for you.
The other thing you could get involved in is property crowdfunding. Some example websites that offer this include Simple Crowdfunding and The House Crowd. Do your research and make sure your chosen crowdfunding source is a reputable company. Use the FCA website to ensure they are suitable entities you can invest in.
With property crowdfunding, you can put small amounts of money into a project that is being managed by an expert property developer. Your money is invested until the property deal is done. Then the house is sold, and you get your money back with interest, in theory.
But you have to be aware that you won’t be covered if anything untoward happens. For example, if the deals went under because they weren’t managed properly, or something happened in the economy, that’s money you’d likely lose. So, just make sure you read the small print before you invest in any project. Understand that your money may not necessarily come back to you. These opportunities are more high risk, which you have to be aware of before you get involved.
Private Sector Property Investment
In this situation, there are a number of private individuals looking for someone to invest in a property deal. They’ve sourced a house, worked out a deal with the vendor, and put together a brochure/proposal for you to invest in their property deal with a 7% or 8% return.
Personally, I don’t recommend this when you’re first starting out. Of course, you need to understand what they’re offering you. Do you understand how to appraise a property deal? Or how to look for weaknesses or gaps? What about knowing how to make sure you’re going to get your money back? What will happen if you don’t?
Certainly don’t invest a lot of money in the hope that it’ll pay off with a great return, as it won’t necessarily happen. People have unfortunately been burnt this way before. If someone approaches you and says, “I’ve got this deal, would you like to have a look at it?” be very wary.
Of course, they may well be a connector trying to put you in touch with someone who has a property to sell, and you’re the one looking to invest. But check first; is it a good property, and in the right location? Make sure you do your homework.
The Bottom Line
Ultimately, you can invest in property whatever the amount of money you have available, because there are options and opportunities when you know what you’re looking for. You can find out from mentors who have already been there and done it. Please be careful though, as there are a lot of scammers out there. Including people selling courses which promise the earth, but don’t get you anywhere.
That being said, stay positive! The world is your oyster in terms of property if you look into it. There will be something that’ll fit your budget, your time and your energy.
If you want to talk some more about your money and financial future, sign up for a 15-minute strategy session with your coach (that’s me!), The Female Money Doctor. Let’s chat about your financial journey and the steps you need to take to prosper and do well!
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