If you’re one of the many people considering retirement property investment strategies, you may not be aware that building a portfolio is just as attainable as the purchase of a single property.
Similarly, if you have your sights set on building a portfolio, you may not think that a single purchase is what you’re looking for.
As an experienced property professional, I often hear about what people feel they should do, rather than consider what really works for them. After all, just because a strategy works for someone else, doesn’t automatically guarantee it will work for you.
Of all the retirement property investment strategies, I’m focusing on building a portfolio vs making a single property purchase as it’s one of the most common binaries and one of the most interesting to explain.
***Important*** I am not FCA registered and this blog is for information only. I would urge you to always seek advice from a qualified Independent Financial Adviser before proceeding with a property purchase.
Building a portfolio
As retirement property investment strategies go, building a property portfolio can be easier than you think. If you have a good, trustworthy power team behind you and the capital for acquisition costs, you can hit the ground running.
The key is to choose wisely with your first property and buy below market value. You can then refurbish, rent it out and refinance about eight months down the line. And then do it all over again.
This strategy is known as BRRR (buy, refurbish, rent, refinance) and is a proven and effective way to build your portfolio. It is a straightforward process for those who have the relevant expertise and power team behind them.
If you’re new to investing, don’t let that put you off. Creating a good team who can communicate effectively, advise and act on your behalf is part of your due diligence. Ultimately, you as an investor are building an efficient well-oiled machine to support you.
Single Property Purchase
For various reasons you may not find the idea of a portfolio appealing. This is absolutely fine, as long as you’ve taken independent financial advice and assessed it as a part of your investment strategy.
Single buy-to-lets, for example, are generally not considered ideal as the overall yield may be too low for some.
However, if you are happy with a lower rental yield in favour of capital appreciation and a long term plan (i.e.leaving the property to your children) then this could absolutely work for you, as long as you have considered the tax implications of doing so.
Here are some examples of single property purchases you may not have considered:
Buy-to-flip
Buy-to-flip can be an excellent strategy for investors seeking quick cash flow. Best done with a joint venture partner such as a property developer, buy-to-flip is good for a first time investor looking to dip a toe in the property market.
With this particular strategy, you are seeking a property in need of renovation, making the necessary refurbishments and selling it on. To maximise your profit you will ideally be looking to add value as much as possible with extra rooms.
Pros:
- Quick cash flow in as little as three months
- You’ll only own the property for a short time
Cons:
- Short-term strategy with one-off payout
- Best done with a project manager as the process can be complex
Assisted Sale
With the assisted sale strategy, you have a motivated seller whose property just isn’t selling on the open market, so needs some help.
You agree to fund a home improvement loan in order to refurbish the property and bring it to walk-in condition. Your money is protected by taking out a second charge against the property as insurance.
Acquisition costs are calculated and a fair price is agreed for the seller. If you like the idea of helping someone in need to sell their home, then it’s win-win all round!
Pros:
- Quick cash flow
- You don’t have to purchase the property
- You are actively helping the motivated seller
Cons:
- Short term strategy with one-off payment
- Requires a joint venture partner
HMO (House in multiple occupancy)
A single buy-to-let property may not provide sufficient yield, but if that property is an HMO with multiple rooms all with a separate rental agreement, you can see how it would add up.
HMO works well as long as it is situated in an appropriate area. You will need to study demographics; is there a University or large employer situated nearby to ensure no voids?
You need a licence to run an HMO and the acquisition costs may be higher depending on how much refurbishment work is needed. You’ll also have to ensure that the building can meet the strict EPC requirements, but the resulting yields can be worth it.
Pros:
- Multiple income streams from one property
- Less expenditure on utilities as these are usually shared between tenants
Cons:
- A HMO license is required
- Seasonal tenants such as students mean greater tenant turnover
Advice from a property professional
Property investment remains one of the most solid investment strategies despite recent events, but it’s important that you choose the one which works best for you.
This means looking carefully at where you see yourself at retirement, and what you hope to achieve. Best done using a financial advisor, this can include planning how you will pass on your investments to your family.
In the meantime, if you’re finding that your pension isn’t performing as well as you hoped, then some of the single purchase investment strategies mentioned in this blog can give it a much needed boost.
I’m going to sound a note of caution and say that the success of these investment strategies depends on how much you are prepared to do your due diligence. Stay alert, be thorough and question anything that sounds too good to be true.
Choosing a reliable, independent property sourcer with the right accreditation can mean having a ready-made reliable team, saving a great deal of time in resource building.
In conclusion
Thanks for reading. I hope this blog has been useful in helping to demystify some of the retirement property investment strategies. I understand that it can be a bit bewildering if you’re new to property investment, but help is out there.
I’m always happy to discuss any of the issues raised in this blog so if you’d like to get in touch, I’m happy to answer any questions with a free, no obligation consultation.
Written by John Nicol
Founder, Ascension Property Investments
Get in touch on 01383 603091 or email me via [email protected]
