Investing in real estate uses a very simple business model you save up for a property deposit approximately 25% of the buildings value, you buy it through a mortgage do any works needed to the property and rent it out to a tenant via a property manger you can then use the rental profit to start saving towards your next property.
This is talking about real estate investing in its simplest form there are more complex and involved strategies which can be implemented to increase your ROI.
Its important when investing in real estate to create a good amount of savings for any problems you may face ideally you would want a minimum of 6 months of expenses saved but a year is more advisable this would help you if the property needs any work or if the building becomes vacant at any point.
You can leverage you returns using a mortgage (this means when you you gain interest when the house increases in value on the overall value of the property not just your deposits value)
Its a tangible asset unlike stocks you can actually see what you have brought in person
You can partner with people to buy more deals
You can often get back your deposit after renovating a property by re mortgaging at its new value
There’s multiple strategies and paths you can take with real-estate for example buy and holding single family buy to lets or buy rehab refinancing multiple family housing.
Real estate has a high barrier to entry you often need 25% for a deposit on a BTL mortgage
The debt you get by using portages can often worry some people
If you choose to manage the property yourself you may have to resolve problems at unsociable hours (this can be resolved by using a property management company)
Who should invest in real estate
Almost any one who isn’t put off put by the debt, the money needing for the deposit can be removed multiple ways which will be discussed further down.
Who probably shouldn’t invest in real estate
People who like to have constant control in my opinion you will have a harder time in real estate if you don’t let some people like property managers help you there experts in what they do so sometimes you need to let go and trust other people otherwise you may have to be up in the early hours of the morning to resolve a problem on the house.
People who are put of by the debt, if you can afford to buy a house cash then by all means you can by a BTL in cash but you do get lower returns doing this and personally without the leverage aspect of real estate I would problem want to focus more on stocks as they have similar returns however require much less work than real estate to keep running.
Ways you can get money for a deposit if you don’t earn much money
Find someone you can invest with if you find one person you’ve just split your upfront entry fee by a half and the more people you find the lower the first deposit becomes you can find people that are willing to invest almost any where a common place is with family members you trust or friends.
If you own a property you could reportage (only do this if you can afford the additional amount per month) but a lot of people will have this option available to them.
You may even be able to buy a property via a personal mortgage fix it up and then reportage using a BTL mortage (I would never guarantee this would work as some banks may be opposed to this however it may be worth a try)
Understanding your target market
Like any business you need to understand what your potential clients needs are, this is something you will have to find yourself based on what and where you are buying but below are a few things to look at
Local amenities such as shops
Distance to train links
Distance to schools
How do you find the expected rent
A place I would always start is a property website and look at similar properties to rent on the same street this gives you an idea of the markets price you can use this to evaluate whether a deal is likely to be profitable.
The best way I believe is to ask an expert like a letting agent to look at the property as they will know exactly what they expect the property to achieve in a given market.
Ways you can add value to a property
When buying a property you can add value in multiple ways but I would suggest to keep it simple you don’t have to completely remodel the house to add value.
Ensure the kitchen and bathroom are done to a good standard
Ensure the garden is well maintained
Ensure all electrics and plumbing is up to date
Once all the basics are covered you may consider opening up the kitchen to create a kitchen diner for example or adding on suites if the space allows however I would speak with an expert before doing these as they sometimes may not be worth your investment or may even loose you money.
So investing in real estate isn’t for everyone but if you think it is for you I would recommend reading a few books about the subject, choose your strategy based on your plan and area and save up a sizeable deposit.
when making an investment like real-estate it is important to do your own research and decided for yourself what you want to do as each area and each person is different
Books id recommend reading when thinking about investing in real estate