5 Top Tips on how to achieve a 20% return on a property investment
Even in a challenging economic climate there are still opportunities to achieve a high return on cash investments in the UK property market, however there is always a degree of risk associated with any investment.
Nicholas Wallwork, owner of Propertyforum.com, has recommended 5 strategies and products that will help investors achieve returns of up to 20%.
1.Houses of Multiple Occupation
HMOs provide landlords with the ability to rent out multiple rooms within a property on a stand-alone basis, with an array of communal areas such as a kitchen and living room etc, and are particularly popular among students and young professionals.
This option allows landlords to generate a higher income than they would potentially receive through a standard buy-to-let property.
According to Nicholas Wallwork, the management of HMOs can take up some time however, if the paperwork and contracts are in place, and there is effective communication between all parties then the time involved won’t be too onerous.
“Once you have experience in the HMO market there is nothing stopping you from building a HMO portfolio with the potential to lock in rental yields in the high double digits”, says Wallwork.
Self-development of a property project for investors with experience in the construction industry and who already have the necessary skills in place, can increase the potential return on an investment.
A self-development strategy can require further upfront costs however there are financing options available in the market to help investors in this scenario.
Wallwork believes it is; “simply a case of balancing the risk/reward ratio against the required investment, your experience and ability to finish the job”.
3. Joint venture
Joint ventures are an effective way of utilising the skills from different individuals, as some may have skills in construction but lack the finance, while others have the cash to invest but limited building skills.
There are of course risks involved with joint ventures. A lack of input from one party can delay the project and incur additional costs. It is therefore advisable to have a legally binding contract in place between all parties which can define everyone’s roles, liabilities and obligations. Miscommunication or lack of communication can be one of the main barriers to success in joint venture developments.
4. Equity finance
There are many finance brokers who can provide opportunities to investors by bringing together those offering and those looking to acquire equity stakes in property.
Those looking to acquire an equity stake in a property venture are likely to be offered an array of opportunities. If a project requires additional finance, that is not available from the traditional banking methods, this can offer an opportunity to negotiate an attractive basis for investment. Similarly, those with experience, expertise and contracts could be in short supply and therefore priceless to another party – one man’s rubbish is another man’s gold!
5. Auction property
There are many pros and cons when acquiring property through a property auction.
At an auction, you can often come across a variety of attractive deals however there will usually be competition from other investors. It is important to know your finance limits and the potential return on each property on offer. The bidding process should be ruled by head over heart and with little or no emotion.
It is recommended investors research and visit properties they wish to bid on at an auction, as this will allow them to gather information on the property market in the area and any potential problems that they may incur.
Full article is available on Property Forum: https://www.propertyforum.com/property-in-the-uk/5-ways-achieve-20-return-cash-todays-property-market.html