Many people still believe that they have to go down the traditional route of buying houses to acquire property; however, especially in 2019, there are many ways people can do this without forking out large deposits by using creative property strategies.
People can control other landlord/homeowner properties via several solutions. I believe those who wish to do so must get compliant first, ensuring they have the right licenses such as public liability/professional indemnity, property redress scheme membership, HMRC anti-money laundering registration and ICO data protection; however, this can be purchased for around £1000.
The reason why those who go on to do property deals should make sure they are compliant is to cover themselves should any deal go awry. There is a lot of legislation regarding fraud and illegal money transactions where property is used as a tool. It is always better to be safe than sorry and is of paramount importance to have the necessary protection in place to protect one’s reputation.
It is a great idea for those who may not have the initial funds to purchase a property to find 10-25% of the asking price. They can provide a service where they acquire deals from vendors, sell deals to investors and charge a fee, or can look into strategies such as lease options where a property can be secured from a motivated seller.
Typically, they may be in negative equity and are open to the idea of selling the property to you at a future date for a fixed price, and you agree for them to let the property to you for a period of time. The price you rent the property for should cover the outstanding mortgage but still allow for a profit. Solicitor fees would be required for this strategy but would be a lot lower than the traditional way of purchasing.
This will allow for time to collate the necessary capital to purchase the property, or it can be let to a normal tenant or someone who wishes to rent the property to buy, so a tenant buyer, who may not have the capital to purchase the property straight away but could do so in the future. Either way, this is a great way to earn money from a property you don’t own.
Other strategies where great cash flow can be created are serviced accommodation, where you can secure the property from the landlord, guarantee their rent, while making the property available to be rented on a night-by-night basis similar to a hotel. This is a great way to earn really good cash flow. You would also need to put some money into a potential refurb to ensure the mortgage on the property is apt for this strategy and things such as cleaners and maintenance, but again wouldn’t be as much as a traditional purchase.
Another similar way to do this is in an HMO scenario where you would rent out the property on a room-by-room basis, again guaranteeing the landlord’s rent while taking the difference in profit. This does mean managing the onboarding and offboarding of tenants and ensuring the bills are paid and maintenance, etc.
This could also be managed by a property management firm or an agent, which will eat into profit, so this would be only for those that would like to be a bit more hands-off and wouldn’t mind paying for it from the profit.
There are other opportunities where you can look for someone who is cash-rich & time-poor; this is where you can manage the project on their behalf, offering a return on their investment, which is also known as a joint venture (J.V).
This is for those who are willing to manage every aspect of the project, but the beauty of this is that you don’t have to put any money in, as long as you deliver on the project, as well as dealing with all the aspects such as tradesmen, timelines, etc and also managing the investors’ expectations. You would ensure the terms are agreed with your partner in a legally binding document. However, you will get a return for your time and effort, which could even be as much as 50/50.
There is also another great strategy called an assisted sale whereby you act for the seller as their agent, but you set a minimum figure that you aim to achieve for the vendor and anything above that figure is split as a percentage.
We go down the Assisted Sale route when a Lease Option isn’t suitable, and a BMV offer around 25% below market value has been rejected. We explain that we have an alternative solution to a cash BMV offer, which is to vigorously market for a buyer with a view to closing in a quick time frame within 60 days and aim for 85% of the market value.
The deal would be that we set a minimum price for the property and anything we achieve over and above that price will be split on a 50/50 basis between us and the vendor. This means our percentage is our fee, so there is no cost to the vendor.
For this strategy, we look for properties that aren’t moving and sellers that are fed up with the length of time the property has stayed on the market
Example:
We find a property that is currently on the market for £300,000 but has been stuck for a few months. We contact the vendor and explain the proposal. We offer at 85%, which would be £255,000. We would offer to sell the property and achieve £255,000. Anything above, we would split 50/50
We market the property as discounted for a quick sale, for say £275,000 with some room for negotiation; we would hope to achieve £270,000, giving us a fee of £7500. Obviously the more the merrier, but this is a good example.
If you do a few of any of these deals mentioned or a combination of a few of them, you could be well on your way to earning enough income to purchase your own properties. Remember, you can always sell deals to investors, as you won’t be able to do everything; this is a great way to build up your war chest. Some people just focus on selling deals instead of taking on any properties to manage, which is a great way to earn a high income with more of a hands-off approach.
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