Property investment isn’t an exact science. Many investors build their portfolio without relying on much theory. They pay attention to market changes, they follow their instincts, and they listen to their advisors.
But it can be useful to think about the crux of your strategy. Here is an overview of the two approaches you can have to property investments.
A Short Summary of Terms
There are two basic guiding principles you can use to build your property investment portfolio:
– The idea is to buy a property
in need of repairs, invest in renovating it, and make it more appealing to potential buyers. Then, you sell your property
at a considerably higher price, and you move on to the next investment.
• Buy-and-Hold – also referred to as Buy-to-Let – In this case, you want to purchase a property and then hold on to it for a longer time. While eventual sales are a possibility, you start by focusing on making the property appealing to tenants.
Taking some time to reflect on the way you do things is important for seasoned investors and newcomers alike. Now, let’s look at the pros and cons of both approaches.
The Upsides and Downsides of Buy-and-Sell Approach
Many people are attracted to this option because it promises quick profits. However, it’s important to understand that this method requires more work on your part. It also doesn’t always work out the way you planned.
• It can accelerate your progress up the property ladder.
• You have more control over the property, as you don’t have to worry about tenants damaging it.
• As you become experienced with this method, you will gain the connections necessary to make the repair process as smooth as possible.
• Some people enjoy making a property more appealing to buyers.
• It’s too easy to underestimate the cost of repairs and renovations.
• This method is considerably more labour-intensive, and it will cut into your free time.
• You may find it difficult to predict the timeline of selling your property. If you want to sell above a particular price, you may end up waiting a long time until the market shifts to fit your vision.
How to Make It Work:
If you want to use this method, consider hiring internet estate agents to help you make good sales. They will help you sell the property on your timeline and according to your terms.
The Upsides and Downsides of Buy-and-Hold Approach
“Buy and hold” is a strategy that’s widely used on the stock market. Many finance giants swear by it, and it’s easy to see why it’s popular on the property market too. You can use the rent to supplement your monthly income and keep up with your mortgages.
In this case, the idea is to choose a house or a flat in a stable and welcoming neighbourhood and then work towards attracting renters. It also works for up-and-coming locations that are likely to see significant economic growth in the near future.
• Your property brings you a steady monthly income.
• You achieve financial stability. Your property can act as a backup in case your financial situation changes for the worse. In times of economic uncertainty, this consideration becomes more important than usual.
• If you wait until the time is right, you can make use of the changing property market and then sell your property at the perfect moment. Of course, it can be difficult to know when that moment is.
• Holding one property for long means that you aren’t making full use of your options. If you don’t move up the property ladder, you miss out on some great opportunities to improve your finances.
• Dealing with tenants can be frustrating and it can put your property at risk.
How to Make It Work:
You need to get comprehensive insurance before you start looking for renters. Working with agencies can help reduce the risks in this strategy.
What’s the Verdict?
Most people use a combination of both approaches. This seems like a good compromise, and it works well for people who don’t have too much free time but who want to make bold new investments.
Do you have an investment property that isn’t bringing satisfying profits? Consider looking into a house price valuation
. If you know what the property is worth right now, it’s easier to decide if you want to sell or hold on to it.