When first starting in property investment, it can be hard to build a large amount of capital to invest. Instead, consider these creative ways and innovative strategies to get your business off its feet.
The COVID-19 pandemic’s effects on the housing market have seen a demand for high deposits, but mortgages at some of their lowest rates. And with an influx of property for sale due to the coronavirus backlog and a stamp-duty holiday coming to a close soon, now is the time to act if you plan to begin a business investing in property.
So, if you are considering taking advantage of the property market right now, keep reading for some of our top advice and creative tips for increasing your property portfolio.
Rent to Rent
The first step you can take to better your property profile is to get experience in property management. Renting a property from a tenant to then rent out to others, is an excellent way for understanding the processes that come with renting a property and developing them in some cases. If you rent a property that needs some work, this is the perfect opportunity to add value to the property and make it more desirable. This allows you to charge a higher rent than you are paying, bringing more cash flow into your pockets for a future deposit on property investment.
While you’re not directly investing in property in the sense you desire, you are ethically making money from properties without buying them. This is a great way to enter this sector without having a deposit ready for your investment.
When looking at buy-to-let deposits, you will notice that they are around 30%, making them unaffordable for property investors just starting. Instead, lease options are contracts which allow you to control a property with the opportunity to buy it on or before a specified day at a specified price. This is also known as a ‘no money down’ strategy to property investment as you can secure a property for as little as £1.
Lease options are a combination of two strategies: the lease, and the option. The lease is the agreement with the owner to rent out the property to tenants in return for a monthly payment. The option is the price agreed to buy the property later, but this is not an obligation.
If you want to start your property investment this way, giving yourself time to save for the property purchase date, then keep an eye out for anyone looking to move quickly or who may be in negative equity as they are more likely to benefit from a lease option.
Exchange with delayed completion
The third and final strategy for entering property investment when you don’t have the capital to support a deposit is delayed completion. This is very similar to the lease option, but rather than having the option to buy the property on or by the specified purchase price, it is an obligation.
Once again, you have time to save up towards the deposit and get yourself on the property market. The seller can even set up monthly payments to make it more manageable, and so that when you come to buy the mortgage, it is more manageable.
Using one of these strategies, you can begin your property investment career without having a deposit to hand. While the process will be longer, it will be more worthwhile as you can feel more comfortable and confident in your ability to keep up with payments or make extra cash before developing a property.