Buying property is one of the best and safest investments you can make and buying when the market is in poor condition like an economic crash (ride it out if you have a property during a crash as markets recover) helps buyers get a better deal on a property. Investing in property is a sure way to build your wealth and below we are going to show you 5 real ways to make money from a property.
So you may have a property or are interested in buying a property and want to make some income of that property. You may be thinking about the following.
- Buy a property and keep hold of it so the actual value of the property increases over time. So if you buy a property for £300,000 and over 5 years the property increases to £350,000 you make £50,000 over 5 years. That is a nice return for a single property and if you have multiple properties then the more you will make.
- Rent the property if you are not living in it during the period you hold it so lets 5 years like the scenario above. That way if you have a mortgage the tenant will pay the mortgage so you don’t lose money and you charge them more than the mortgage. Find a location with a good yield – this is the amount of rent you can expect to earn in a year expressed as a percentage of the property price. So, £8,000 a year on a £130,000 house would be a 6.15 per cent yield but £7,500 a year on a £125,000 house is a 6.25 per cent yield – showing that the cheaper house gives a better, pound for pound return. This way you will be making money from rent every year as well as the increase in property price every year.
- HMO (house of multiple occupancy). This is a great way to make more money as there is a higher rate of return. This is where you rent out each room in the property. There are laws and standards regarding this so make sure to check them out before you proceed. You can rent out each room in the property and the guest share the bathroom and kitchen. You can have a living room but people rent that out as a room for more income. You can earn 12%-15%+ a year on the house price. This is better than renting but requires more work.
- Buy a house and redo it. Here you can buy a dilapidated home and redo it all. You paint all the walls, repair the home, add the carpet and furnishing and then sell it. Here you can buy a home for say £80,000 redo the property for £8,000 and then sell the property 6 months to a year later for £110,000 leaving you with £110,000 – £88,000 = £22,000 profit.
- Invest in property fund. there is a way of investing money in the property market without having to purchase a property. There are two main types of commercial property fund. The first, and typically the most popular, is direct property funds, which buy commercial real estate such as industrial and retail parks as well as office blocks. The aim is that the rent from these properties should provide a steady income for investors, who can also potentially benefit from any capital appreciation. The second style is indirect property funds, which invest in the shares of firms that operate in the property and property development sector and as a result, their performance tends to be much more linked to the wider equity market.
Once you get enough income for the property you can then invest in another property and grow your portfolio. Eventual you can invest in big funds that buy huge apartment blocks and make more money.