This is an opinion strategy article base on our own experience of building a portfolio worth millions of pounds with dozens of properties but should not be taken as financial advice.

If you are looking to invest in property and have a healthy budget of £150k - £250K in cash, then you are in a really good position where you can explore multiple options.

Firstly, at Fabrik we would never invest all our money into just property. SO ideally if we were investing £150k - £250K then ideally, we would actually have £300K +plus in spare cash and would spread our money into other assets. So before Investing make sure this isn’t all your savings. If you do only have £150K - £250K then perhaps look to invest £100K into property.

If you have a large amount of money that you want to invest, then you are obviously in a good position financially. However, there are several different strategies you could take depending on the specifics of your place in life.

 

1. Leverage your funds and by multiple properties to build a portfolio quickly – This first strategy may be ideal for a younger investor who wants to build a long term retirement plan, but also ideal as a semi hands off approach.

 

2. Buy & Refurb – The most involved way of investing is taking on a project, be it refurbishment or a complete development/ conversion project. This is ideal for someone who is wanting to go into property investment full-time and make large amounts of cash in a shorter time period.

 

3. Cash Investment on one property – A cash purchase is a great option for parking your cash somewhere safe. As the old saying goes “safe as houses” meaning you money is safe sitting in property over the long term. This is also ideal in a recession where mortgage rates could rise quickly and a mortgage investment

 

Strategy 1 – Leveraging

 

So you have around 200k cash set aside for property. You can also get a BTL mortgage at around 20% deposit in current climate. 

1. You can Split this up in many ways…

• 3 deposits of £50,000 (with £50,000 remaining for other costs)that would allow you to put deposits down for 3 properties each at £250,000 each.
• You could look at cheaper areas and put down 4 deposits of £40,000 (with £40,000 for other costs)

 

Or maybe put down a larger deposit (which is a slightly safer options especially if we enter a recession) as you will get a better rate and have less to pay in interests, so lets calculate with the following…

• 3 deposits at £50,000 (£150,000 in deposits and remaining £50,000) for 3 properties at around £166,000 each (£498,000 in total property value)

 

Now we calculate additional costs that can come from £50,000

 

• Stamp duty at £5 for 3 properties totalling £498,000 = £14,940

 

• Legal fees budget £2,000 per property, however if you are using the same solicitor for all properties you may be able to save money here = £6,000

 

• Ideally you will then want £5,000 for unforeseen costs on each property = £15,000

 

So, this now totals an initial cash investment of £185,940, a little short of our budget of £200,000. You can spend this money on a number of things, maybe furniture for your properties, some decorating costs to improve the occupancy or maybe you can use this to take an investment course to help you with your investment future.

 

Tips on this strategy

• Get a property with active rental returns (a tenant) or maybe an assured rental income. You will need the income to pay the mortgages, otherwise you may end up with an empty property an unmanageable mortgage payments.

 

• Look North, the northern cities and towns of the UK will have cheaper properties better yields. We recommend Birmingham, Liverpool, Manchester and Sheffield for a reason.

 

• Look for property that will attract good tenants (working professionals). You will have a lot of mortgages that needs paying so you really will need the income. Also, bad tenants can cost you a lot in maintenance and management and may shrink your margin over the long run.

 

• Diversify, as a beginner it is not a good idea to buy all the properties in the same building. Nothing is risk free and if there are any issues with the development you invested in, it will affect all your properties.

 

 

Strategy 2 – Buy and Refurb

Step 1

Find a distressed or below market value property. If you are looking at your hometown as you want to keep it a local investment. Speak to all your estate agents directly as you may be able find an off-market deal or get in early on something before it is seen by others.

However, 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 = £400K

Minus 25% developers’ profit = £300K (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 = £400K

Minus 25% = £300K

Minus £40k refurb = £260K (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 = £400K

Minus 25% = £300K

Minus £40k refurb = £260K

Minus 10K other costs = £250K (new budget)

Step 6

Calculate your full expenses.

 Our working example is we are looking to purchase a property at £250,000 with the aim of selling it for £400,000 based on area price research.

 Our Initial costs here will be

30% Buy-to-let mortgage deposit = £75k

£40k Refurb

£10K in additional costs

stamp duty £10k

= £135K in money down (including deposit)

or

= £60k in costs

Now we aim to sell at £400K. With the borrowed finance of £175k and £60k in costs and deposit of £75k we are in the property at £310,000 meaning if we sell at £400,000 we can get £90,000 profit + our 75k deposit back (as we paid £10k on stamp duty otherwise would’ve been £100k which is 25%). This is a total 22.5% profit.

Alternatively, we could refinance, this would mean we would pull the £90k out of the property, however as we have put down a deposit of £75k + £60k = £135k, we still have £45k in the property.

135K in minus 90K = £45k

Ideally, we would not refinance unless this £40k was close to £0 where we can quickly make the money back through rental income.  

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.

Strategy 3 – Hands off Cash Investment

This is the most straight forward investment and involves very little after initial purchase. Ideal for wanting to secure and park you cash safely.

At the time of writing we are heading towards a predicted recession, meaning a cash investment is arguably the safest investment, as you will not face any future rise in mortgage rates. You may also argue that property prices could go down in recession, however this is hard to predict, and ultimately your money is better sitting in a property than sitting as cash that will likely inflate during a recession.

The process is simple, find a cash property which is fully managed and buy it. PBSA (purpose-built student accommodation) is popular, as are new build and off-plan products that can also offer a rental assurance.

With £200k -£250k you could purchase 2 PBSA properties or one city centre apartment in somewhere such as Sheffield or Manchester.