Time is money, as the saying goes. Particularly when it comes to seeing a return on your property investment.
It’s a generally accepted fact that the longer you leave your property to appreciate, the greater the gains.
But what happens when you want a faster return on your property investment? The good news is that if you’d rather not wait while your property appreciates in value over 20 or 30 years, there are different strategies to suit you.
As an experienced property sourcer and investor, I’m often asked about how long it takes to get a return on your property investments, so I thought it would be helpful to put my thoughts down in a blog for you.
PLEASE NOTE: I am not a financial adviser, and the figures mentioned are estimates only. The information in this blog is for guidance only, and you should always seek independent advice before proceeding with an investment.
How long will it take to see a return your property investment?
Again, I wish this were a straightforward answer. It really depends on factors such as your investment strategy, and the type and location of property you choose to invest in.
We can, however, look at the average timeframes and advise you on what to do to ensure the best possible outcome.
So, without further ado, let’s take a look at an average timeframe for returns on some of the most popular property investment strategies. I’ll also explain a little about how they work.
Assisted sales
Assisted sales is one of the quicker ways to see a return on your property investment. Unlike other property investment strategies, you’re not buying the property, so there is no conveyancing required.
With an ‘assisted sale’ strategy, you as the investor are helping a motivated seller get their home to the required condition for it to be able to sell for a good price.
Your funds will be used as a loan to assist in the refurbishment of the property, and the proceeds divided after sale; the mortgage company will get monies owed, then you will be allocated your share, and then the seller will receive a previously agreed sum.
The whole process can typically take three to four months, but could be over in as little as six weeks. It just depends on how long the refurbishment takes and the subsequent marketing and sale of the property.
Typical timeframe: 3-4 months
Buy-to-let
Buy-to-let is a well-known and effective way to get a return on your property investment. In this strategy, a sourcing agent finds a property according to your preferred criteria and it is then mortgaged, refurbished and tenanted via a letting agent.
Interest-only mortgages can take up to four to eight weeks to finalise, although if you’re a cash buyer you can certainly save time and skip this step. During the conveyancing period, the refurbishment work can get underway.
Refurbishment time depends on the contractor and the availability of materials but can take as little as four weeks to complete. During this time, a letting agent should be focussed on finding a tenant for you who can move into the property when it’s ready.
Once a tenant is found and rent starts being paid, you should start to see a return on your investment as soon as possible.
Psst! It’s very important for you to be in touch with the letting agent as soon as the sale is confirmed. You want to minimise the potential for the property being empty so have a tenant ready to move in.
Typical timeframe: 4-6 months
Buy-to-flip
This strategy, where you as the investor source a property to refurbish and sell on, requires a slightly longer time frame as funding often isn’t as straightforward as getting an interest-only mortgage. But it’s still very much doable, and worth it.
For a buy-to-flip, unless you have all necessary funds available for refurbishment you would need to apply for a bridging loan, which can take up to four months. Once the conveyancing is done, you can then go ahead with the refurbishment.
All being well, the refurbishment could take as little as four weeks but may be much longer. Once the property is sold, you can enjoy a lump sum as your share of the profits and maybe do it all again!
Typical timeframe: 8 months
Buy, refurbish, rent, refinance (BRRR)
This is pretty much the same strategy as buy-to-let, but with a key difference; you are deliberately waiting a period of at least eight months to enable the property value to appreciate, and then borrowing against it to fund another BRRR property.
This may be one of the longer term strategies in this blog, but it is worth the wait. As long as you calculate your rent accordingly and make sure you have your tenant in place as soon as refurbishment is complete, you can reap the rewards.
So, to recap, you would need to allow the 4-6 months that a typical buy-to-let would need to be completed, and then add further time for the value of the property to appreciate.
Tip: When refinancing, it’s wise to leave at least 10% of the value in the property you’re borrowing against to prevent negative equity.
Typical timeframe: 8-10 months
Advice from a property professional
The strategies I’ve detailed above may sound simple but they require complex preparation and people around you that you can trust. You should always do your due diligence and research any property investment strategies that interest you.
Once you know whether you want a faster or slower return on your investment, you can progress from there.
The same goes for your ‘power team’. Your solicitor, estate agent, letting agent and contractors should all be part of a dependable network. This is key to getting returns on your property investment within a manageable time, so choose wisely.
It’s also wise to be aware of timeframes and plan accordingly. It may feel like spinning plates at times, but the last thing you need is a void period in a buy-to-let. You don’t want to be paying for an empty property with all the associated running costs.
Consider the role of everyone in your power team and make sure they are all on the same page. Is the contractor working to schedule? The mortgage or refinance application on track?
Delays happen, especially in this climate, so it’s better to be prepared.
In summary
If you’ve made it this far, thanks for reading! I hope you now have a fair idea of how long it takes to get a return on the different property investment strategies – but, of course, how long it will take you will depend on various different factors.
It can take a while before you feel confident enough to make the move, but being fully informed definitely helps.
I’m always happy to answer any questions or concerns you might have, so please feel free to contact me for a free, no obligation consultation.
Written by John Nicol, Founder of Ascension Property Investments
Get in touch on 07939135125 or email [email protected]
