Investing in property remains one of the most secure routes to long-term wealth creation and as an asset class, has outperformed all other mainstream investments over the past couple of decades.
There are, however, several different types of property investment strategies you can follow, and which one is right for you will depend on your personal circumstances, lifestyle and financial goals.
Putting your own home to one side, residential property investment strategies usually fall into the following categories.
If you want to know what these property investment strategies involve and whether they’ll help you achieve what you’re looking for, read on!
Buy-to-sell
This usually involves buying run down properties, completely refurbishing and renovating and selling for a profit.
Novice investors often do this with their own homes, doing the work over a couple of years while living there: professional investors will aim to buy as cheap as possible, do the work as quickly as possible and then sell for as much profit as possible.
A critical success factor is timing. Like Warren Buffett said, ‘a rising tide floats all boats’, so in a best-case scenario, you could make huge mistakes, but if the market is rising, even amateur investors could make money. That’s just lucky!
Good for:
• Lump sum cash injection and first-time investors who want to try their hand at developing a property while living there • Good project managers • Professional full-time investors
Bad for:
• Stability and income • Amateur investors
Residential property development
This strategy is much like buy-to-sell but differs in that it’s not just light refurbishment and low-level conversion. Residential property development, whether you’re building in your back garden, buying land or flattening a property and redeveloping on the space, will definitely require planning permission.
It is a much more sophisticated investment strategy with the added complexity of things such as management of significant building projects, planning risk and approval, building regulation sign off and issues with regards to financing and funding projects.
It can be highly rewarding and profitable if you get it right, but just like buy-to-sell, you are at the mercy of the market in terms of your ability to find buyers to purchase at the right price.
Good for:
• Lump sum cash injection • Good project managers • Professional full-time investors
Bad for:
• Stability and income • Amateur investors
Fly-to-let
What’s not to like about having a holiday home in one of your favourite locations (at home or abroad) that also makes money? However, the numbers rarely stack up.
From a personal point of view, if you work out how often you’ll realistically be using the property and compare the investment required with the cost of booking a holiday for the same amount of time and it works out cheaper, then great!
From an investment perspective, don’t underestimate the time and money needed for management, maintenance and leasehold fees as well as advertising and renting it out (not to mention the stress and seasonal variations). After looking at the income and expenditure and assuming zero capital growth (because that should be a bonus, not a strategy), you’ll probably find that the financial return is minimal if anything at all.
Good for:
• Regular low-cost holidays and investors with the time to enjoy it
Bad for:
• Returns and ease of management
Buy-to-let
This is the most widely adopted investment strategy in the UK. There are millions of people who have bought, inherited or rented out a property that they used to live in to supplement their income or provide a top-up to their pension.
Usually, these properties are then handed over to a letting agent to manage everything and forgotten about.
If bought with a mortgage, which is often the case, most people were happy for rents to cover costs, relying on long-term capital growth to give them a return. This is becoming increasingly difficult in the current market with rising interest rates and operating costs and stagnant rental prices.
Single-tenancy buy-to-let can and still does work in some instances, but you have to buy the right property, at the right price and in the right location; ensure the rent exceeds costs and is stress tested against a potential rise in costs (interest rate rises, management fees, tax bills etc) and you shouldn’t gear too highly.
Good for:
• Long-term capital growth • Cash-rich and time-poor investors • Investment for children
Bad for:
• Income generation and could even operate at a loss • Short-term return on investment
A low-risk, high return alternative property investment strategy
The great news is that there is a more robust buy-to-let strategy available and a low-risk solution for ensuring you achieve both your personal and financial goals.
The Platinum Property Partners (PPP) House in Multiple Occupation (HMO) model focuses on maximising the number of lettable rooms in a single property and renting them individually, which vastly increases rental income.
When converted to a high standard and offering the growing population of young professional renters with an affordable alternative to renting alone, investors can generate 200-400% more than single tenancy and other HMO models, providing market-leading profit margins.
While the upfront time and money required is often higher than standard buy-to-let and involves more complex planning, licensing and building regulations, the financial and personal rewards are significant and could be achieved quickly - with the long-term gain very financially rewarding and more stable than any other property investment strategy you could consider.
Good for:
• A low-risk but significant monthly income with the added bonus of potential capital growth
Bad for:
• Inexperienced investors with less than £300,000 starting capital • Investors with little or no knowledge of the niche HMO market
If you want to earn a significant lifelong income and have the time to enjoy it, then the PPP specialist property investment strategy offers both seasoned and novice investors a tried, tested and proven system to follow for success.
Take a look at our Free Resources & Downloads page to take our Property Investor Profile test and find out exactly what type of property investor you are, and if you have what it takes to succeed! Or, use our online Net Worth Calculator to get a complete picture of your personal financial circumstances, to better understand the investment strategy that is right for you.
