How to invest £50k in property

Please note this article is an opinion piece based on what we would do in the given scenario and should not be mistaken for financial advice.

Firstly, it is important to understand that there are 2 questions here. If all your savings added up to 50k or less, personally we would not invest our entire capital into a property. If this is the case, then we would look to educate ourselves on the property market.

If you only had £50k or less

1. Spend up-to £10k in education which includes courses books, audiobooks, going to events speaking to as many experts as possible.

2. Once we are confident in our knowledge then we would look at putting some of these skills into practice and start sourcing deals through a “Rent to Rent” strategy.

“Rent to rent is simply where you rent a property for a period of time, typically 3- 5 years and you pay the owner a guaranteed rent, you will then rent and manage the property to tenants for a higher price than all your costs.”

 

3. The education stage will include lots of education in the “Rent to Rent” market and over time you will learn how to source good deals, find properties, learn what areas are good, learn a properties true value, how to calculate  everything else that goes along with being a landlord, all without buying a whole property reducing the risk of losing all your savings.

 

4. Being new you may not make any profit, you may even lose money, however the education may be worth it if you wish to pursue property investment as a profession.

 

If you had more than £50K but do not wish to spend more than this on your investment.

If you have a lot of spare cash and are looking to spend no more than £50k in an investment then you are in a far safer position, at which point for us investing in property is a no brainer.

There are 2 strategies we would potentially look at here…

Buy Refurb, Refinance

As professional investors this would be our chosen method…Understand this will take up your time…

Step 1

Find a distressed or below market value property.  Speak to all local estate agents directly as you may be able find an off-market deal or get in early before it has gone to the open market.

We find that going North ok the UK there are more deals to be had and property prices are far lower. You can find deals on platforms such as Rightmove.co.uk or Zoopla.co.uk or again go directly to agents.

Step 2

You will need to appraise a lot of properties, maybe 100 or more. The process here is rather simple, you can go on Rightmove or Zoopla and view sold comparisons on the same road or immediate area. Don’t necessary look at the listing prices, as the sold prices will be more accurate in terms of property value. Another tip is look at sold price of properties that are in a good condition, as the aim will be to refurb a property to this higher standard when you sell it.

Step 3

Conduct some simple maths. Take the price that you think you can sell a property for and remove around 25% - 30% for what we call developers profit, this would then be your rough property budget, before refurb and other costs.

Working Example

Property price in area of a property in good condition property = £100K

Minus 25% developers’ profit = £75K (new budget)

Step 4

Your main cost will be having to refurb a property, so get a builder’s quote. If you are a builder and plan to do this your self obviously adjust this to materials and specialist jobs you cannot do yourself. This could range from £25k-£35K or more depending on the property size and level of work required.

Working Example

Property price in area of a property in good condition property = £100K

Minus 25% = £75K

Minus £25k refurb = £50K (new budget)

Step 5

Get all other costs, from legal, stamp duty, finance fess etc…  add this to your refurb costs.

Working Example

Property price in area of a property in good condition property = £100K

Minus 25% = £75K

Minus 25k refurb = £62.5K

Minus 5K other costs = £45K (new budget)

Step 6

Calculate your full expenses.

Our working example is we are looking to purchase a property at £45,000 with the aim of selling it for £100,000 based on area price research. Total expenses of £30,000 giving us a £25,000 profit.

Our Initial costs here will be

20% Buy-to-let mortgage deposit = £20k

£25k Refurb

£5K in additional costs

= £50K

Step 7

Finding a property deal with this level of meat left on the bone will be difficult. This could involve putting offers on dozens of properties before one is accepted. This will take time.

Step 8

Refurbish The property

Step 9

Refinance the property

In the current market this could be extremely hard to find such a good deal, but as a company we have managed to find deals over the years where we have successfully made a 25% return. It will take a lot of due-diligence and perhaps a lot of patience. You may find you should reduce your expectations on the profit to 15-20%. Obviously, the size and value of the project you take on may change these numbers dramatically. The important thing is to get accurate numbers at all stages.

The pace of the property market in 2022 £50,000 may simply not be enough to invest in, unless you really are investing in the cheapest areas of the UK. Blackpool property investments are a fantastic opportunity in our own opinion.

Off-plan Fully Managed Opportunities.

The other way you could go about an investment is best suited to those who do not have the time to spend on property investment (a busy professional). Lots of developments are almost tailored to investors wanting to enter the property market but as a hands-off investment. This means a fully managed development which will often come off-plan or brand new. These also come with a 10-year build warranty.

The steps here are easy in comparison but as a rule of thumb they cannot offer as much profit as our first strategy…

Step 1

 Find a number of developments off plan or perhaps in construction stage.

Step 2

Do your due diligence on the developer to ensure they have a good track record.

Step 3

Research how much value you could gain just over the build process.

Step 4

Still conduct your own research into, location, tenant profile, letting strategy (short term or standard let) and make the decision that is right for you. Some developments may offer a higher income on the face of it but may also come with further risks. You will need to decide your own risk level.

Step 5

Balance out everything from Completion dates, track record of developer and management company, additional fees, location, letting strategy, property value and growth and potential rental yields.

Step 6

Make an offer.

As a company with have run due diligence on many off-plan opportunities, to find some of these just click here to search our current opportunities.