The boom in house prices mean that the British property market represents a good opportunity to profit from investing in bricks and mortar. Returns are often far higher than putting your money in a bank. So here are four ways you can make money from property.
Buy to Let
There are more than one million buy-to-let investors in the UK who enjoy an income generated from letting one or two properties out. The best recipe for buy to let success is to buy a run-down property and convert it into a HMO (House in Multiple Occupation) for the maximum profit. This works best in areas where there is no shortage of working age people in a younger age bracket, in places where there is a shortage of rental properties.
An example of a successful buy to let would be spending around £100,000 on a run down two or three bedroom house, and converting it into a five bedroom HMO property at a cost of around £40,000. Each room could then be let for around £300 per month, producing around £18,000 per year as income. Financing can be obtained through buy-to let mortgages.
However, bear in mind that the rent charged will have to cover 125% of the mortgage repayments and a 25% deposit is usual. The property you purchase will also need to be in ‘habitable’ condition prior to any works to qualify for a buy-to-let mortgage.
Adding value to your home can be achieved by building a conservatory, an extension, or making internal alterations such as knocking through to increase the size of rooms. However, always be sure that your proposed alterations represent a good increase in value after the costs involved. As a general rule adding a bathroom and bedroom can increase the value by up to 25%, yet every square metre costs around £1,000 per square metre.
Property Refurbishment for Quick Resale
Buying a property to do up and resell can be a profitable venture. The problem is that financing for a refurbishment project can be hard to obtain under existing mortgage rules, so a bridging loan is a good solution through using the sale or refinancing of the refurbished property as your bridging loan exit strategy.
Be aware however that the remortgage amount should be higher than the existing loan secured on the property, as a result of the value of the property having risen due to the refurbishment. Upon talking to a bridging finance specialist, it appears there has been a 25% rise in bridging lending throughout 2013/14 due to the ongoing strength of the property market.
Rent a Room
If you don’t want to invest in property then renting rooms in your existing home can be an easy and quick way to increase your income. Under tax rules, the Rent A Room scheme allows home owners or resident landlords (whether or not you own your own home) to earn 4,250 per year tax free from renting out a room. Alternatively, language schools are often looking for host families to house foreign students who will pay around £150 per week for a room.
Bill Turner is free-lance landscaper and writer. He enjoys teaching, traveling, authorship, and of course walking his dogs along the beachside.