Getting Started in Property
How does anyone start in property? Well, there is the legal and not legal way of starting out. I don't know much of the corrupted ways as I have not studied it. However, I have come across the concept often enough to identify erratic or spontaneous acts or methods of work.
Often linked to cultures and sets of beliefs, such as one has sought funds from self-organised private unregulated crowd for deposit on a property, with the intentions to pay back each member an agreed amount every month. I strongly counsel against and warn against such practice as the property industry is regulated in this country (UK).
We often hear of the few successful individual with many properties, remember time have changed and so have the financial rules and regulations. It is not the same as it was 20 years ago, do not be too quick to jump on the property ladder without first, properly investigate and learn the industrial operations.
The Reality of Property Investment
What we don't often hear is the level of bankruptcy due to bad management and the likes, yet it is visible in plain sight, in the form of:
- Repossessions
- Monthly auctions
- Dissolvement of partnership
- Quick Sale to minimise losses
- Unexpected takeovers of overruled contract
- Motivated vendors
- And the list goes on
This is not a comprehensive list! On the other hand, I'm not saying those reasons are only as a result of bankruptcy and bad management. What I am saying is, it's a lack of knowledge resulting in bad preparation for such an significantly serious life changing challenge and investment, often due to being impatient for success.
Preparing for the Property Industry
To prepare for the property industry and to 'Avoid the property pitfall', one must accept the reality of organised education. Meaning it will take:
- Years to prepare yourself in regard to the subject
- Learn the industry (the service)
- Learn about properties (the product)
- Study the types of property deals (transactions and contracts)
- Identify those who are trading in the property market (market representative)
- Find your legal representative (layers, solicitors, financial advisers)
- Becoming resourceful (others and things you will need)
- Etc.
Again, this is not a comprehensive list. You must be patient to learn more with time not all at once!
IMPORTANT WARNING
DO NOT UNDERESTIMATE THE AMOUNT OF WORK REQUIRED BEFORE GETTING STARTED IN THE PROPERTY INDUSTRY
Your First Lesson
If are just browsing, then read on. If you are seeking to learn because you have made a choice to start this journey then study by researching the following sub-title below from 2-3 other writers on the internet.
Study the contents or information provided:
- Listen to what they are saying, do's and don'ts
- Certain things about their experience
- Different part of their journey
- Study a few others property developers
- WARNING: Do NOT sign to any PROPERTY COURSES at the start
- Compare the experiences
- Ensure you understand the details
Property Investment Strategies
There is no right or wrong answer with any of the strategies, it all depends on what you planned, desired to achieved and able to accomplish. There is no guarantee from anyone to any solution only you can guarantee yourself for the outcome.
Buy to Let (B2L)
This strategy is probably the most famous, buy and hold unto as a long-term investment strategy. Long term cashflow and equity would build up with time depending on location, developing areas, where many tenants would want to live in and can afford, don't forget the type of tenants to be considered.
Advantage
Can be the least risk strategy in property as it generates cashflow and long-term gains in many ways with other strategies.
Disadvantage
Untrained Landlord and letting agents can get the administration or system wrong and it could go pear shape.
Buy Refurb, Refinance & Rent (BRRR)
This strategy is focus on pulling out the initial investment to keep rolling unto another project applying the same strategy and so on. Buy and add value to the property so one can re-mortgage the property.
Advantage
Work out the calculation right, one would be able to pull out all the investment and re-cycle the money as the deposit for another project.
Disadvantage
Need to do your homework well, get the figure right, as previously said there is not much room for errors with this calculation.
HMO's (Houses of Multiple Occupation)
HMO is not a strategy as such; it does deserve its own space. It could fall under several strategies. Instead of letting the property as a house or flat to one family or tenant, this principle is based on letting out the individual rooms to maximise the cashflow income.
Advantage
A desired strategy for the big eyes, the model requires largest initial investment as it has the potential to generate greater cashflow.
Disadvantage
There are a lot of legal requirements for the larger HMO and as per added rooms. Check out all the details well.
Lease Option / Rent to Rent (R2R)
Also known as corporate letting. You basically rent a property being a house or HMO from a Landlord on a single let management contract and with permission to rent it yourself from all parties that have an interest in on the property.
Advantage
This is by far the daddy of all strategies. You are creating cash flow from properties that you don't own and will not for many years and still make money from it!
Disadvantage
The market is saturated. It is not simple as you need to get all the right contracts for different parties.
Buy to Sell or Flip (B2S)
Buying, refurbing and selling residential property is known as buy to sell (B2S) or Flip or trading, those who use this strategy are referred to as 'traders' more than 'investors'.
Advantage
Relatively low risk, experience can quickly be learnt for the more adventurous. The lump sum could be generous.
Disadvantage
Must wait not only until the project is finished, until it is sold to get the sum of money. Got to know the area well by research.
Conversions
At times the law appears to be more relaxed about the planning, a specific niche more for the higher risk takers with more investment. Converting commercial (B1) property (offices) are now much easier to convert into residential.
Advantage
Can be very profitable as conversion could add a lot of value. A niche market as most property entrepreneur is out of this arena due to the level of expertise required.
Disadvantage
Requires more experience and expertise on team. Could be much more unpredictable and costly with time.
Joint Ventures / JV Syndicate
A rather fast 'start' to property buying with anything as per agreement between parties, event could become a no money down strategy in the JV partner agreement, whatever suits the parties.
Advantage
Can have more than one JV partners and for multiple projects. Each partner's experience adds to each other's benefits.
Disadvantage
Must get to know the person well, agree all working relationship. Very dependent upon experience and ability to agree on everything.
Deal Packaging
Another favourite with big property trainer for the 'broke property wannabee entrepreneurs', get a packaged deal sell for a fee. This is also known as wholesaling, could combine with other strategies such as option agreements.
Advantage
Is obviously you can make a substantial amount from a deal, dependent on the type and size of the deal.
Disadvantage
The market is saturated with them, and it take a long time to master and build the client base.
Final Advice
I shared a brief idea on the above strategies for the simple facts that most people would read a couple of pages on each strategy and then conclude they know it all. The best advice I could give is this, you should choose one or two strategies and study inside out over the next couple of weeks. Get to know which strategy you then choose to start with, stay focus, don't try to spread yourself with more than one strategy at the start. Focus your energy, knowledge, efforts and then branch out.
Interested in Property Auctions?
Auctions can present opportunities — but only for those properly prepared. Learn the full auction process, legal responsibilities and due diligence steps.
Explore Property Auction GuideNeed Personalized Guidance?
Have specific questions about property strategies? Get in touch with us for more detailed information.
Contact Us