How to invest £100k in property

If you were looking at investing around £100,000 it is important to firstly look at ensuring this isn’t all the money you have. It is never wise to put all your eggs into one basket, but better to diversify and hold savings back.

If you have perhaps £150,000 spare cash, then investing £100,000 is not as much of a risk. But should you put all of your investment into property. At Fabrik we would probably recommend investing some cash elsewhere…

So if we were looking to invest a sum of £100,000 we would break it down as such

• 10% in a solid commodity such as Gold or silver, depending on the current market. At the time of posting this Silver can be picked up at a cheap rate.

 

• Another 10% into an alternative asset, this could be anything based on your own research and current market. One idea is mining shares, where you invest in mining companies hoping they have success extracting raw materials. Or maybe a share or even if you’re a risk taker then crypto may be a long- or short-term option for a small amount of cash.

 

• This would leave us with 80% so around £80,000 of the amount we wish to invest…

 

So now we have £80,000 to invest in property with we can look at 2 strategies

 

1. Buy, refurb and refinance
2. Fully managed hands-off investment

 

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. 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 = £200K

Minus 25% developers’ profit = £150K (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 = £200K

Minus 25% = £150K

Minus £30k refurb= £120K (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 = £200K

Minus 25% = £150K

Minus 25k refurb = £120K

Minus 5K other costs = £115K (new budget)

 

Step 6

Calculate your full expenses.

 

Our working example is we are looking to purchase a property at £115,000 with the aim of selling it for £200,000 based on area price research. Total expenses of £35,000 giving us a £50,000 profit. 

 

Our Initial costs here will be

20% Buy-to-let mortgage deposit = £40k

£30k Refurb

£5K in additional costs

= £75K (just short of our £80k budget)

This is ideal as it gives us a £5k margin of unforeseen costs.

If we could not find a property deal along these numbers we probably would not move forward with it.

 

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.

                

Off-plan Fully Managed Opportunities.

The other way you could go about an investment is best suited to those who do not want or 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 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.