Property Investment Strategies for Investors to Adopt

Investing savings into property is one of the most common ways to create a higher return of investment. With so many wanting to become property investors, it may seem easy. However, there is a lot to consider before making the plunge; one of these considerations being the type of strategy adopted.

Breaking down property strategies, there are two main reasons why people invest in property. One, buying a property to then rent out and two, buying a property to then sell on for profit. Although, if it was as simple as this, then there wouldn’t be articles giving advice.

This piece will look at different strategies regarding how property investors could use their newly bought property and their pros and cons.

To start, there are a few different ways to choose how to let your property out:

  • Single lets to professionals
  • Student Lets
  • Holiday lets
  • Buy to sell
  • HMOs
  • Rent-to-rent
  • Lease options
  • Commercial lets
  • Single lets to tenants on benefits

 

Single Lets to Professionals

This type of renting that most would class as being the ‘traditional’ method. Single lets to a professional are basically renting to a person, couple or family unit. To be in the correct position to implement this strategy, you need to make sure your finances are in order. Also, the property an investor buys needs to be in the right location, has the right tenants wanting to rent and the pay a fair price.

 

ProsCons

One of the easier strategies to use

Returns aren’t always as high as other strategies

Applying for mortgages with this strategy is easier

Choosing the wrong type of tenant can be detrimental

Doesn’t take a lot of time to manage

The returns can be predictable

 

Student Lets

Letting to students is, realistically, a sub-type of HMOs renting (see further down regarding HMOs). It is worth bearing in mind that the student market has its own types of characteristics to understand before investing in.

Usually the market for student lets is easy to predict as students will need to rent a property for a certain time (nine months to a year) and will sign up at a certain time. Also, students usually come under one joint contract so if one student leaves, the other students letting the property will have to cover their rent.

 

Pros

Cons

Predictable that students will always need properties to let

Pressure from purpose-built accommodation built near

Less management overhead

May be more wear and tear as some students may not look after the property well

 

Holiday Lets

As the name suggests, this is a short-term rental to holidaymakers. This can easily be mixed with ‘serviced accommodation’; however serviced accommodation is aimed more so at business travellers from urban areas. As previously said, the two can get mixed up although the only difference is the customer a landlord targets.

 

Pros

Cons

Don’t have to go through the eviction process

Lots of work involved in managing the property and marketing
There are better tax treatments with this strategy compared to others

Can be difficult to apply for a mortgage

Can be high yielding is the occupancies are high

 

Buy To Sell

Also known as ‘flipping’, buying a property to sell is obviously different to buying to let. The main aim with this method is to buy at a price, make profit, sell and go again. The main attraction to flipping a property is the gaining cash quickly.

There are two key tips needed to successfully flip a property. The first is top buy the property for the right price to start. The second is to stay within a budget when renovating the property.

 

Pros

Cons

Generates lumps of cash quickly

Very hands on and time consuming

Don’t have to deal with the maintenance and tenants as you would with a rental property

Investors only make their money if the projects are executed properly

Don’t need to worry about the long-term health of the property market

May be forced to sell

 

 

HMOs

HMO stands for houses in multiple occupation, so simply it is a house share were rooms are rented out. However, there are different types of HMOs so if a landlord decides to choose this method of renting, they need to research into this well.

Even though a landlord can generate more income from using this rental strategy, there can be larger costs involved. This is because HMOs tend to be rented out with bills included and because there will be more occupants there is more room for wear and tear.

 

Pros

Cons

High yield compared to single lets

Higher costs with HMOs

Can charge more due to room by room

More regulations that the property has to comply with

If one tenant stops paying, then there will still be income from others

Not as easy to get a mortgage on in comparison

Usually harder to manage

 

 

Rent-to-rent

As it says on the tin, rent-to-rent is where a landlord rents to a tenant to then let them rent a property. This is becoming a more so common strategy and can be used in conjunction to a HMO strategy.

Pros

Cons

Way of gathering income from property without a big cash input

In the long-term, there will be no capital growth

Can be started quickly if you find the correct opportunities

Hard to find landlords who will want this arrangement

Not enough margin as this can be a very hands on job

 

Lease Options

A lease option is similar to a rent-to-rent, however with this option the investor also has the ‘option’ to buy the property for a set amount of time and a fixed price.

For example, if a property costs around £200,000 then an investor may have the option to buy the property outright at £220,000 in the next three years. Whilst the new investor pays to own the property, they also take over the expenses and obligations for the property.

Pros

Cons

Generates cash with the possibility of capital growth

Not all landlords will sign up to this type of agreement

Don’t need a big cash sum to start

Very mads on to manage this type of rental

The owner that a landlord agrees to do with this deal could try back out. This could then create a big and expensive legal battle

 

 

Commercial Lets

As it reads on the tin, commercial letting is renting a building that has the purpose to hold a business. This is very different to any of the other methods spoken about in this article. The whole market is subject to economy and if landlords were to rent a commercial property, it can be hard to find a tenant.

 

Pros

Cons
Tax advantages – can be held with a pension

Can be hard to find a tenant to rent the property

Less ongoing work in terms of maintenance. Tenants can be responsible for the maintenance instead of landlord.

All dependent on the economy. Can be harder if there is a recession

Longer term tenancies

Mortgages on a repayment basis

Voids can be longer

 

Single lets to tenants on benefits

There are different routes and types of ways to rent through this method and overall the terminology can be tricky. Some areas have rent calculated by a Local Housing Allowance (LHA), others by Universal Credit (UC) and many tenants still refer to this strategy as DSS.

Even though there are different terms, they all relatively mean the same thing, renting to those who have housing paid for them by a local authority.

Pros

Cons

Always a high tenant demand

Specialist management is required

Predictable levels of rent

Some properties can tend to be less desirable and will benefit from less capital growth

High yielding

Jess Mitchell

I started writing for PPO back in August 2019. I particularly enjoy writing about new housing developments and upcoming property events.

About Sophia 68 Articles
I started writing for PPO back in August 2019. I particularly enjoy writing about new housing developments and upcoming property events.

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