Property has always been boasted as a profitable investment, for good reason. Falling outside of traditional investments in stocks and bonds, property has proven to be both a resilient and profitable investment that many investment introducers such as FJP Investment choose to favor.
In large this is because of the consistent demand for property. People always need somewhere to live from a residential point of view, with almost everyone buying or renting a property themselves at some point in their life.
With interest rates in the UK remaining low, buyers are incentivized to take out a mortgage and buy a house. However, with so many ways to invest in property, many investors get overwhelmed when entering the market and struggle to work out how to best get a return on investment (ROI).
How to maximize ROI
There are many ways to benefit from property investment, the level in which you find success with this depends on how the purchase was funded.
You also have to consider whether the property will be used for rental income, multiple occupancy or ‘flipping the property’ to get a faster return on investment, we will delve into this idea further later. Depending on the route you go here will determine your ROI.
One such way to make your property investment go further is to purchase the land for development. Make sure you have got licenses to build and you have located up and coming areas likely to be sought in the future.
Whether you decide to build on the land yourself or sell-on to a developer having made the changes to the land to make the development, purchasing land is a great way to turn a profit.
Flipping a property
To clarify, flipping is when you have located and purchased often derelict property, renovated the building to a greater standard and sold it on for a profit, including expenses to renovate the property.
Purchasing a property that needs structural and cosmetic work offers you an opportunity to purchase property at below the market price and can be done in a relatively short period of time.
To support this, homes bought that require renovation is 10% lower to purchase on average than a house that does not. With renovation being more tax-efficient than the purchase of property outright and with the buyers able to instill their own creative influence, these are just further reasons to flip a property.
An area that property investors often overlook is purchasing property with a view of turning it into apartments or again buying existing apartment blocks and refurbishing.
Although the initial investment is higher, the returns are too. Renting out each of the apartments to separate tenants will ensure that you are maximizing the money you can obtain from the area owned.
Similar to this is operating the property as a house of multiple occupation (HMO). An HMO, although perhaps harder to satisfy the minimum size and facilities criteria, does offer investors a chance to receive multiple income streams through various tenants in one household, without the need to construct multiple apartments.
Buy-to-let leads the way
Whether you decide to invest in land, an existing property or a multi-block, the best way to optimize this is to simply let it out to renters once completed.
A recent study has shown that, over the past 18 years, buy-to-let on average is the most profitable asset class available, significantly outperforming other major asset classes. With consistent returns with relatively low risk, many investors choose to invest in this asset type.
With the ability to gain a passive income on the property through renting, on top of a capital gain on the property and the fact you still own the asset, this method of investing is very successful. This is multiplied if you can build a portfolio of properties.
To maximize the profitability of your buy to let investment, you have to do your research beforehand. Significantly, you have to choose the right location for your property investment.
Location is key
Choosing the right location will determine the success or failure of your buy to let investment. An example in the UK is in the North of the country in cities such as Liverpool and Manchester. Both of these cities are experiencing growth at a greater average rate than anywhere else in the country and has done for several years now.
Choosing an area that is seeing high house growth now is an obvious suggestion, but also looking to the future prospects of the area will help too.
For example, are there any significant infrastructure developments in the pipeline over the next few years? Even investing in surrounding areas to those that are seeing growth will get you a return over the coming years and you can ‘beat the crowd’ and invest early. Areas close to major cities (including London) with good transport links are likely to see steady growth, particularly as the Brexit situation comes to a transparent close.
Make sure you do your research before entering any investment of this kind and seek professional help when it comes to the logistics and legalities of this. Now is as good a time as ever to enter this highly successful investment opportunity.