You cannot start any new venture without a solid plan, and property investment strategies in the UK are no exception. But many would-be property investors start out without even the most basic of plans. Often, people think that property prices go up so it is a good investment or they are inspired by wealthy people who own property. It might feel like sitting around planning is just delaying you from getting out to look at properties and start making money. But almost everyone who achieves great success started out with a solid plan.
What does a property investment business plan look like?
We can boil your new property investment plan into three simple steps:
Where you are now
Where you want to get to, and
What actions you must take to bridge the gap
Where you are now
To give an analogy, you can’t plan a route unless you know where you’re starting from.
Working out your starting point is the easiest part, because it involves information that’s either already known to you, or else easy to find out.
You’ll need to be clear about:
The amount of money you’ve got to invest
The amount of savings you can allocate to property investment in future years
The time you can invest each week or month
The skills and knowledge you can apply to your property business
Knowing how much money you’ve got to invest should be straightforward, but it’s probably worthwhile speaking to a mortgage broker to go over what borrowing options that you have as this will determine your total investment figure. A broker will also be able to tell you about your options around releasing equity from your own home if that’s something you want to consider.
Where you want to get to
Once you know where you’re starting from, the next step is to know where you want to end up or. Essentially, you need to know your goal.
Whether you want to be rich, secure, or build a future, you need to pin down exactly what that means in financial terms. And, just as importantly, when do you meet that goal.
You might be surprised by how much thought is involved in answering these questions properly. It’s easy to talk in general terms, but it’s another matter entirely to look honestly at your ideal lifestyle and determine what a genuinely meaningful figure is.
The same is true for “when” – and it’s an often-ignored factor that is at the centre of the most basic of investment decisions.
So, by this point in the plan you need to:
Assess your finances to build up an honest picture of where you are now and put some serious thought into both where you want to get to, and when you want to be there.
Once you have done that, it’s time to start thinking about the details of the third step: the property investment strategies for the UK that you’ll use to pursue your goal.
Each of the steps that you take from your start point to your end goal make up your strategy – and strategy is a vital component of your investment plan.
A rule of thumb
One way of looking at it is to take the amount of money you’ve got to invest in property, and assume that you can get a 10% annual return on that money (ROI) – which is a rough rule-of-thumb for a normal property bought with a 75% mortgage.
That’s unlikely to be enough to hit most people’s goals straight away but that’s where we factor in time; if you save up the rental income for 10 years, you’ll be able to buy another batch of properties just like the first.
But most people will want more – which is where more of an advanced strategy comes in, allowing you to get better results, faster.
This might include:
Buying properties and adding value through refurbishment, so you that can refinance at the higher value and buy your next property more quickly.
Buying properties at a discount, once again allowing you to refinance at a higher value and move on to the next one.
Turning properties into HMOs, so you can generate a higher ROI on them.
Flipping properties for a profit, so you can replenish your cash more quickly
Simply appreciating the need for one of these strategies from the start is highly advantageous.
Most people don’t: they’ll rush in, use all their money to buy properties that generate good profit levels, and quickly become stuck because they didn’t go in with a plan for how they were going to get to their target number. They’ll effectively be starting from scratch, having to scrape together the money to begin again.
These strategies, when applied effectively, can get you to where you need to be. But that’s not to say that all of them will be equally good for you. Each of them has different risk factors, requires different time commitments, and is suited to different skill sets. After all, everybody’s skills, attributes, and preferences are different.
So, coming up with your strategy involves:
Starting with an assessment of where you are now.
Deciding where you want to get to, and by when.
Seeing how far you’ll fall short by just buying average properties.
Thinking about your own skills, time, and preferences to choose which strategy (or strategies) you’ll use to fill in the gap
It might take a while, and that’s fine – it’s not an easy decision. It’s important to start with a clear vision and to not get distracted by every new opportunity that comes your way. However, every plan is just a starting point and along the way you’ll be seeing what works, reviewing, and adjusting course as appropriate.
Turning your strategy into action
Having an appropriate goal and a solid strategy to get you there are essential, sure – but nothing is going to happen until you actually take the steps that are necessary to execute that strategy.
Breaking it down
As you work through the tasks, it’s important to have sub-goals as checkpoints along the way.
Sub-goals are how you stay on track: by setting a deadline for each sub-goal, you can make sure that your progress is fast enough.
All you need to concentrate on is ticking off your tasks each day, and your overall goal will be achieved automatically.
So, this final step in your plan is about breaking that big goal down into sub-goals, and those sub-goals down into the smallest individual tasks.
This article is for information purposes only.
Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.
There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.