Considering which property investment strategy to pursue isn’t easy. You have a range of options which are all different in their approach. To help you, we’ve written this blog to discuss four of the most effective investment strategies to consider. These include:


  1. HMOs
  2. Flipping
  3. Buy, refurb and refinance
  4. Rent to rent


1. HMOs

HMO stands for a House in Multiple Occupation. This essentially means a house is rented out by the room to people who aren’t part of the same family. The benefit of an HMO is it offers better cashflow than single lets. You can normally charge more by renting out by the room than you could if you rented it out as one unit. Therefore, you’re more likely to generate more cash than you would for a normal single let.


Are there downsides to an HMO strategy?

There tends to be a lot of work involved with managing an HMO. People will regularly move in and out and there’s likely to be more wear and tear to the property because it’s being more heavily used. You’ll also have to take on other types of admin, including managing licensing requirements and dealing with tenants regularly moving in and out.


Who are HMOs for?

HMOs could be good for you if you have the cash to invest and want to replace your income quickly. They’re also better suited to people who have more time on their hands. This is due to the amount of admin involved when managing the property and the tenants using it.


2. Flipping

Another strategy you could consider is flipping. It may sound like a circus trick, but it’s a legitimate property investment strategy. You buy a property, do it up and then sell it to generate profit. Some people will even buy a property and then sell it or flip it without doing any work to make a profit. 

The great thing is you don’t need to rent it out to anyone, so you don’t have the hassle of tenants, which will also appeal to some people as well.


What are the drawbacks of property flipping?

As property investment strategies go, it’s very hands-on. For example, you have to spend a lot of time looking for these deals. Just because a property is run down, it doesn’t mean it’s a good opportunity for a flip. It might not be the right price, so you’ll have to do your numbers to ensure it’ll be a worthwhile investment. 

While this investment strategy has opportunities to generate high profit levels, you won’t get a consistent income. This is because once you sell the property, the asset is no longer yours. If you hold onto it, you can rent it out and produce a monthly income for as long as you own it.


What kind of property investor is flipping best for?

Property flipping is best if you’re looking for a property investment strategy that generates cash now. This can help you build a cash pot, generating money immediately instead of over time.


3. Buy, refurb and refinance

The next property investment strategy to consider is the buy, refurb and refinance strategy. Here, you buy a property, conduct a refurbishment to increase its value and then you refinance the property at its increased value. 

The benefit is you end up with less cash tied up in each deal. This property investment strategy is using the refurb portion of that to speed the process up. You’re effectively forcing the property value to go up, so you aren’t relying on the market, but doing it yourself by making improvements.


What are the drawbacks of buy, refurb and refinance?

First, you must find a property that’s priced correctly. Then you have to either do it yourself or manage all the work to bring it up to scratch. Next, you have all the admin of going through the paperwork and costs of getting it refinanced. Certain risks come with this, including: 

  • You could buy at the wrong price
  • You overspend on the refurb
  • The valuer won’t give you the valuation you want — which can bring you to a dead stop because you were relying on getting your capital back out again


Who is buy, refurb and refinance for?

This property investment strategy might be for you if you have ambitions bigger than your bank account. You want to build a big portfolio, but you’ll struggle to save up for multiple deposits. With this strategy, you can buy multiple properties as this allows you to recycle the first deposit and use it repeatedly. 

Clearly, that’s going to be appealing to a lot of people, but don’t forget this is hard work. It requires a hands-on approach and you have to be prepared to put in the effort if you want the results.


4. Rent to rent

You’ll almost certainly have come across this as a property investment strategy. What it means is you take property from an existing landlord and then take it to market. You may have improved the property, upgraded it slightly and then let it out. 

In these cases, the profit you make will be the difference between the rent you pay the landlord and the rent you manage to achieve.


Why would landlords entertain rent to rent?

It’s a good question. They may be fed up managing their property themselves and would love somebody to take it off their hands. You have to find those landlords, but they do exist! So, no money in and profit every month?


What are the downsides of rent to rent?

It isn’t a true property investment strategy because you don’t own an asset. There’s no growth. One of the biggest benefits of property investment is that the assets you own go up in value over time. You never own these properties, so it isn’t a true property investment strategy. In fact, it’s more of a job or a business where you use the property as a tool.

But just like with any other business, you’ll have to put in a lot of time to make it work. And the truth here is that while you can make passive income every month without putting much money in, you’ll sacrifice your time.


Who would the rent to rent property strategy suit?

This strategy may appeal if you have no cash and want to build a cash pot up. But in our opinion, there are probably better options out there. We’ve presented the pros and the cons, so now all you have to do is pick out the ones that sound best and delve a little deeper. 

Still not sure which option is right for you? We’ve put together a playbook that discusses these strategies in detail and provides tips on increasing your property portfolio. Get your copy for life via the link below.