You’ve settled on investment properties as your next investment channel as you are interested in properties and you’ve heard that it can be a lucrative business. Besides what’s more impressive than driving past a property and saying “yes that’s one of mine as well”.
Next decision to make is what type of investments you want to make, are you more interested in house flipping or in buying to let? You may have a preference but actually the decision should have a bit more forethought that what your interest is. In fact if you have a large sum of money to invest it could be that a mixed portfolio is a better option for you. Let’s consider the factors involved.
Investment Properties with High Short-Term Profit Yield
If you want short term high-yield profit from your property investment then the way to go is buying and selling properties, not renting them out. But the amount of profit you make will depend on the margin between your buy price and the sell price. Remember as well that there are several costs incurred in buying a property and then selling it such as real estate agent costs, government taxes and the cost of ownership during the transition.
So how to you build in enough profit margin between your buy price and the sell price? This is all about two things, selecting the right property and adding value.
The right property will be in an area where house prices are on the increase, and the house will need to have work done it to bring it up to the valuation of the other houses in the neighborhood. Ideal situation is to buy the worst house on the best street in town. This is where adding value comes in, you then add the value to the property by renovating and even extending it before selling it.
The profit margin will be dependent on how you carry out the renovation and building work, will you do it yourself or will you have to pay contractors? You profit can easily be eaten up by outsourcing the work to others, so consider what skills and time you have yourself first before committing to a large project.
Investment Properties with Solid Long-Term Yield
Buying to let is the long game when it comes to property investment. You buy a property, perhaps renovate it or at least modernize it, and then rent it out. You then have a steady income over a longer period while you own the property, and then cash out of the investment at some future point when advantageous by selling the property.
Multi family properties such as purpose built blocks of apartments and large houses which can be converted into multiple properties allow for greater regular income and also less downtime between income if you lose a tenant or two for a period of time. This could range from modernising a kitchen with acrylic kitchen splashbacks to redesigning a garden and adding furniture.
If you have the funds you can mix both types of property investment to allow you to build your property portfolio.
To read more on topics like this, check out the finance category.