There’s lot of ways to make money from buying property – but what makes a good property investment deal?
Everyone has their own criteria when they are looking for a good property investment.
Some people like to stick to readymade income producing properties that offer a modest but consistent monthly return while others like to look for development opportunities that can offer big profits.
Some people are looking to flip properties for quick profits while others are looking to do a little work and get a property ready for the rental market.
We take a look at these four ways of making money from property and highlight what you need to look for when sourcing these property deals.
THE READYMADE INCOME GENERATOR
While these don’t offer big returns, buying a turnkey property that’s already tenanted and generating income is one of the easiest ways to invest in property.
Of course you have to make sure you look after all the legal requirements when buying a tenanted property (see our guide on this here) but other than that it’s simple.
Deal with the agents and solicitors and it’s all done.
This means you have no void period at the start, saving you time and money plus you already know how much rent it is producing – so there’s no surprises when your carefully calculated figures don’t transpire.
This is a hassle-free way to start producing a nice yield (look for around 8%) with zero work.
And of course you have the potential capital growth of the property too.
THE QUICK REFURB
When you are looking for properties that need a light refurb before you rent them out you want to make sure you are going to get some return on the initial work you put in.
Look for properties that you can get a good deal on – at least 10% below market value is a good rule of thumb – that also give you a good yield.
Then do a little work to get the property ready for market and get it tenanted and collect your monthly income.
This is where your ability to spot a good deal with the potential to make a good return really comes to the fore.
Look for a below market value price on a property that has got scope for you to add value.
You want to aim for the total cost of your investment to be less than 80% of the final value after you have done the work.
Then gives you headroom so you can either resell the property for a quick profit or refinance the deal to pull out as much of your cash as possible.
Make sure you factor these costs into your business plan.
THE DEVELOPMENT PROJECT
If you can find a property with the potential to do some larger development work then there are big profits to be made.
You may find land to build an extra house, turn a building into several flats, or convert barns into new homes.
There’s a lot of competition for these kind of deals and there’s also a lot of work and more risk involved.
But all this is reflected in the bigger profits on offer.
You won’t usually find these kind of deals in estate agents or even auction houses.
Often you will stumble upon them or hunt them down through contacts, property sourcers, your own network and knocking on doors.
At M3 Commercial Finance we can help you secure property finance. Contact us today for an informal chat about your needs.
Contact us today to discuss your need.