Property has long been one of the most popular investment vehicles in the UK and can deliver strong and stable returns to investors. However, it can require investors that have money upfront and this can be the biggest barrier to entry for new investors.
Despite this, there are several different strategies that can be implemented that will help you get started whatever your budget is. The following strategies are ranked from lowest to highest capital requirement.
- Rent Out Your Spare Room
This option can sometimes be neglected and overlooked when starting your property business.
The government provides a very generous “Rent a Room” Scheme which allows you to earn up to £7,500 per year tax-free. This can be a great way to save and earn money from your current home helping you build up your initial capital.
You can use our investment tool to see what is going room rate in your local area. With Octo Data you can see live valuations for single and double (inc with or without en-suite filters) rooms for any street in the UK. It’s free for 14 days, sign up here.
- Real Estate Investment Trusts (REIT)
A REIT (real estate investment trust) is a vehicle where you can invest capital into an investment company that owns, operates or finances income-generating property/real estate. They pool together a large group of investors funds to create a large and diverse portfolio.
However, you’ll have no control over where your money is invested as this is managed and controlled by the investment trust. This can be appealing to those who wish to take advantage of the up property market without the hassle or initial capital need to own their own portfolio.
With REIT’s you can also access investments that otherwise would be well out of financial reach such as investing in large property developments like shopping centres or skyscrapers. You can invest in these funds through online brokers such as Hargreaves Lansdown.
- Property Lease Options
Property lease options are relatively untapped investments with low upfront costs. When you own a property lease option, you can rent out a property without buying it.
You invest some small upfront payment for the process to be legal – as little as £1 – agree a monthly payment to the owner, which is usually set at the amount they need to cover costs and no more, set the length of the agreement and then agree on a purchase price should you wish to buy outright later on.
It can be a tiny upfront investment, with all the benefits of a solid rental income but without the hassle of a mortgage – and if the price goes up beyond your agreed purchase price, you’ll have gained instant equity.
The flip side is that these properties are naturally hard to find, as property lease options offer little for homeowners.
The solution is to go looking in areas with high negative equity – which may not appeal to you for obvious reasons – or run ads targeting people who need to move ASAP, such as divorcees or relocators.
- Airbnb Arbitrage
We have a full blog with more in-depth detail on Airbnb arbitrage here.
Peer to peer loans are often confused with property crowdfunding even though they are two very different strategies.
Property crowdfunding is where a group of investors will pool money together so that everyone owns a proportional share of the project. Your share is dependant on the size of the project and the amount you invest.
There are two common types of investments, one where you invest in development with a predefined exit and the other a standard buy-to-let property. The first strategy will provide generally higher returns much quicker than the latter but is perceived to be a riskier investment. The second strategy comes with less risk and your income will work like any other buy-to-let strategy where rental income is shared between investors over time.
- Use your own equity
This strategy should be used with serious caution as the potential downsides if your investments go wrong could have a lasting financial impact.
The strategy should only be used when you are 100% confident and have other sourcing of income to handle any unknowns that may delay your investment returns. The strategy would involve re-mortgaging your own home and using any equity to fund your property investments.
Please note this blog post is not to be considered as investment advice. We recommend you seek independent financial advice and conduct your own due diligence before making any investment.
Propertymarketintel.com is the leading UK property market intelligence platform giving investors the information they need to deliver strong returns. They bring together 30+ sources of information to give you live data on any UK urban or suburban area. The platform also allows you to source properties and filter by predefined investment strategies.
After completing your first purchase Octo is the perfect free online platform to manage your portfolio. We offer a complete management platform with open banking, detailed reporting, portfolio tracking and an ios and android tenant portal.