There are many ways to make money from property. As a Chartered Surveyor and someone who’s worked for one of the largest private property investment companies in the UK, this guide will hopefully open your eyes to the many different ways which you can make a living from property. I have had lots of requests from people to write a book or a course on highlighting the pitfalls, advantages/disadvantages, and secrets of making money from property which I have found during the course of my 25 years’ experience in the property Investment/Asset Management field. I am currently writing such course. Keep checking this website for announcements. I will of course provide free samples to viewers of this website.
As travelers increasingly prefer “alternative accommodation” and additional options to hotels, the rental demand for such properties has increased. This increased demand leads both to greater occupancy and to higher nightly rates. We have seen a number of markets where, on average, you can expect a double-digit capitalisation rate, with individual opportunities far exceeding even that. If you have a property close to a place of interest, why not consider Airbnb or another short term rental company. A word of warning I do see this area becoming more saturated in the future.
With the growth of global tourism, short-term accommodation is the need of the hour. Although property owners can post listings and manage guests themselves, it’s not easy to give the level of service that travelers expect. This has given rise to short-term rental property managers who work on renting out the property and managing the services on behalf of landlords. Short-term rentals is a growing industry and a good opportunity for agents and property managers to make extra income, even if not pursued as a long-term business opportunity.
Invest or consider investing in next-wave cities (cities with high projected growth). There are about 10 to 20 cities in every country that qualify as next-wave based on economic growth. This can be easily accessed through records in your relevant government office. I’d advise buying properties there.
What is compounding? Compounding works by adding and accumulating. For example, put your profit rent into a pot which is earning interest and you add to it each month. You’d be amazed how you quickly you make serious money. AS Einstein said it’s, “The most powerful invention of man” It works against you so why not fight back. So, how does it work? Lets say you give your child £60 per month (£1.97 a day) and invest in property (12% return). If you keep adding £60 per month and reinvesting the interest, by the time your child is 50 and looking to retire, he/she would have a pot of £1.705 Million. By the time they were 60 – £5.3 Million and by the time they are 70 – £16.5 million. Just for the daily price of a cup of coffee. You need to find the right property but I have properties which are returning more than 12% return.
I’ve found that this is essential to build a property portfolio. For example, if you brought a property for £100,000 cash, and rented it out at say £500 per month. Ignoring management fees and other outgoings at this stage, you’d be making £6,000 a year on your investment. Now let’s say you leverage your £100,000 and went to a bank, or an angel and you got a 75% loan or mortgage, you now have an investment pool of £400,000 (your £100,000 plus £300,000 from investor/bank). Asssume the interest rate you’re paying on this loan is 2.5% (at this current time this is a fairly average mortgage interest rate,) you will be paying back £7,500 per annum interest however, you now have the capital to purchase 4 houses receiving £2,000 per month. Less your £625 per month interest leaves you with £1,375 per month rather than the £500 per month. Your capital value growth will also increase. If property prices increase on average of say 10% in value, it’s now worth (£110,000). If you leverage your money, your portfolio of 4 properties would be worth £440,000, an extra £30,000.
This one is simple. Make sure your outflow is less than your inflow i.e make sure you’re getting more money in than your spending and invest in the difference. Make your money work for you. Re-invest this money with compounded growth (as explained above).
Take a closer look at your outgoings – mortgage, house hold bills, insurance, agents fees. Are you really getting the best deal? Shop around and do this exercise regularly.
Do you know the difference between good debt and bad debt? Did you know that some debts can be good? Bad debt is the debt you get into when you waste your money on things you don’t really need. A new flashy car, expensive clothes, living above your means.
Good debt is when you spend money, cash, credit card, bank loan etc on items which are going to improve your life. This could be an educational course, investments, property, software all of which will give you a return (a future return which is greater than your initial outlay).
You shouldn’t borrow to spend, only borrow to invest. Ask yourself, do I really need that £5 coffee. If I save up I could purchase an educational book which could relay my initial outcome 1000 fold.
One way of making more money from property is to reduce your overheads and costs. Check your mortgage, utilities bills, loans, credit cards. Can you get these cheaper? Shop around.
It’s always best to start with more secure, less risky type of property investments such as a buy to let. Make sure you do your research into the right area. The area needs to have good demand for rentals. Once you have found this area it’s important to add value to the property. This can be done by either purchasing below market value and remortgage at market value, or buying in an up and coming area at market value and see the values increase. Once you have a number of buy to lets, move up the ladder onto HMOs, lease options and then maybe commercial and developments.
Can you redevelop any of your properties? Large rear garden? Extend to the side or can you go upwards? Subject to relevant planning other regulations.
Distressed homes can be a great investment opportunity. Find the market value, deduct all your costs, (deposit, legals fees, refurbishment costs etc) to work out your purchase price. Sellers will often price struggling properties based on what they could be worth, but don’t fall for that. Offer only what makes sense to maintain your return on investment.
Take transaction costs into account when you’re buying and when you eventually sell. Given sellers typically pay the largest transaction cost that can have a material impact on your real return.
As long as people need a place to live, they’ll likely be renting, and so look at purchasing larger properties and then splitting the property up and renting individual rooms to tenants. You can work with a property management company to make this more sustainable if you’re busy, or use a number of apps and software solutions to help automate the management. As always make sure you comply with the regulations.
Once the kids have flown, you may find you suddenly have lots of extra space. Why let it go to waste? Get a lodger, rent out bedrooms to professionals during the week, make a spare room into an office or even offer storage for a fee.
Each year, thousands of international students arrive in the UK to study English. As a host family, you’ll be expected to interact with your guests and provide one or two meals. There’s lots of flexibility—students can stay a week or months. You can sign up to be a host family through specialist agencies or contact local university or college directly.
If you have been in property for a number of years, you might have the opportunity to charge people for your knowledge. If you have a successful and proven track record of real estate transactions, you could be in the lineup for selling your knowledge, writing a book, or developing a training program that outlines a successful method of lead generation.
A self-contained flat at the bottom of the garden has lots of benefits. Other than somewhere for friends and family to stay when visiting—you can rent it out longer-term or even turn it into a boutique hotel room for tourists. But, before you decide to convert your garage, check costs and calculate how long it will take you to make your money back.
Whilst you relax on a beach, your home can be making money for you. All you have to do is make the arrangements beforehand and make sure all your valuables and other precious things are locked away safely. You can then enjoy your time away knowing that you’ve made some money rather than spent it all.
Parking is expensive. So, if you have an unused driveway, why not rent it out? If you live close to an airport or another hub of transport, people can park their cars for less with you or with more time flexibility.
Production companies are always on the hunt for properties to use in film and television programmes. So, if you live in London, or another often filmed city such as Edinburgh or if you have a unique, quirky home—then your property may be the perfect candidate for TV and magazine shoots.
Representing owners and landlords will help set yourself apart from the average agent. When you are representing an owner or a landlord, you are in a powerful position to meet buyers and renters and service them in the best way possible.
Agents can work with banks to periodically visit foreclosed properties owned by the bank to verify that the property is not being illegally occupied by squatters. Fees vary depending on the location of the property and the bank that the agent is working with.
Real estate and investment professionals often find homes that are undervalued, then put them under contract. They add contingencies to the contract that stipulate they will assign the contract to another buyer within a certain (usually very short) amount of time. They then work to find a buyer who is willing to pay slightly more than the price they are under contract for and assign the contract to them, keeping the difference as a profit at closing.
The demand for office and commercial space is increasing. Leasing commercial real estate can be far more lucrative than leasing residential. There are a number of reasons – a) Longer leases. Commercial leases are often five years or longer, b) Higher rents – commercial property generally command a higher rate per sq ft c) most commercial leases are on Full repairing and insuring leases which mean the tenant is responsible for the repairs unlike residential. D) It’s sometimes easier to remove a commercial tenant than a residential tenant and easier to take commercial company to court than an individual.
Without the right property management, any property—whether a multi-let residential, retail, or commercial building—is unlikely to be run efficiently. Good property management companies fix problems when they arise; great property management companies fix them before they happen.
In commercial real estate, 80% of potential tenants and investors start their search online. Can you capture the traffic and convert visitors into potential prospects?
Attracting leads to your website is usually the largest hurdle that many folks can’t seem to comprehend. But with the endless options of online advertising, you can drive traffic to your landing pages almost immediately. If you have decided to focus on increasing your digital footprint, then improving the number of leads that sign up on your website can bring a huge boost to your income.. Advertisers will pay to be in front of your traffic leads.
A short sale is when a lender decides to sell a home for a discounted price to release an existing mortgage. In most cases, lenders pursue short sales when the borrower is in default (the step before foreclosure), but this is not the only time they might use a short sale. Sometimes, the borrower might be current but owe more money than the home is worth.
This is a way to open up your property to an additional pool of renters that would love to own one day but are not in the market for a mortgage just yet. These renters can typically pay more than the average renter and can offer a small down payment. The first step is to design a lease option that is fair to both you and the tenant. If they don’t end up buying the property, you still end up with better income, and if they do, you have an exit strategy for the property and you can move on to more investments.
This is an enormous and largely untapped potential rental income stream. Look to purchase close to large corporates. Speak to them. They often have employees who visit them from all over the world. Most would prefer to stay in a home than a hotel. Corporate housing has emerged as more than just an essential business service for relocated or traveling business executives. Today, corporate housing is a full-fledged lodging solution for everyday individuals who need short-term housing that has the space and convenience of a home on the road.
A great home inspector is basically a superhero for anyone trying to buy a home. A few hundred pounds spent hiring one can save you endless headaches and a suitcase full of money. It’s also a great career for people with construction knowledge who want to own their own real estate business. In a rising market, home inspectors can command premium rates.
If you’re in the market and come across below market opportunities, and you don’t have the finances to purchase the property yourself, why not source the lead to other property investors. Depending on the deal, you could easly make £3,000 to £10,000+ per deal. Start your own sourcing agency.
Renting out residential property is still good business, with yields of 9-10 per cent a year available, particularly in some of the UK’s property hot spots However, changes to the rules governing buy-to-let – namely the levying of an additional 3 per cent of stamp duty on second homes and the abolition of full tax relief on mortgage interest – have helped spur the growth of alternative residential property investments that do not involve direct ownership of bricks and mortar. These include peer-to-peer lending arrangements, crowdfunding schemes and property bonds, all of which promise attractive income streams – and some of which can sound too good to be true.
With peer-to-peer lending (P2P), investors are introduced to a business or property developer via a platform and lend cash in return for interest payments on the loan. Cutting out the middleman – in this case traditional lenders such as banks – means that interest rates as high as 12 per cent a year can be offered. However, P2P is largely unregulated, and while a few platforms are now well-established, many new entrants have limited track records, which is inevitable given that the market grew by some 40 per cent in 2016 alone. Retail investors are attracted to the idea of exposure to property and development without having to stump up the cash required to buy actual property. Although investors do not benefit from capital growth, they stand to earn a return that is fixed in advance, and they know that their capital should be repaid on a certain date. P2P investment periods vary, but they tend to be short: buy-to-let mortgage terms are typically two years, and bridging and development loans have terms of six to 18 months. The latter are used primarily by developers looking to refurbish and ‘flip’ a property, or by business owners who need cash quickly and are therefore prepared to pay interest of up to 14 per cent a year. Lenders are not charged fees, so the interest stated is the amount investors receive. The risk for investors is that a borrower may not be able to pay the interest or repay the loan. Bad debt for P2P platforms averages at around 2 per cent a year. Loans are secured against properties by the registration of a legal charge, so a modest loan-to-value ratio will reduce risk .
Crowdfunded lending works in a similar way to P2P lending, in that an investor’s capital is secured against a borrower’s property. However, borrowing businesses tend to be start-ups or early stage enterprises with businesses plans put together by entrepreneurs themselves, so the timing of capital repayments is uncertain. Additional fees are sometimes levied with crowdfunding products. For example, Crowd2Fund offers a product secured against commercial premises or residential property belonging to directors willing to offer their homes as security, but the platform creams off a 1 per cent annual fee on both interest and loan repayments to investors when they are repaid.
Another route into property investment is a property bond, which may be offered by any property developer looking to raise cash for a development project – typically a complex such as an apartment block or holiday flat development, and normally for a period of five years.
Some of these have been marketed by IFAs, who should then be on the hook if a scheme fails or it transpires that an investment was not appropriate for an investor’s level of acceptable risk, or if a fraud occurs and it turns out that the IFA had not carried out due diligence.
Some, but not all, property bonds are unauthorised collective investment schemes and embody their worst features, such as hard selling. Such products should only be sold to so-called sophisticated investors, defined as those who earn at least £100,000 a year or have net assets of £250,000, but in practice this requirement is often fudged. Many people are lured into these investments because they believe they have a good understanding of property, simply because they have experience of buying a home and they talk about property with friends and colleagues, and also because the returns promised – typically of around 7 per cent – are much more attractive than anything that can be earned on deposit at a bank or building society. However, property development is notorious for running into delays and incurring additional costs.
Don’t ignore traditional commercial property funds. A few funds include residential exposure.
Making money in real estate can be challenging, but there are several ways to do so successfully. These include investing your own money in rentals, becoming a property manager, or adding a niche market—like corporate rentals—to your portfolio.
Watch out for my book which will give you inside, detailed knowledge on how to make a living from property.