real estate

Like many people you’ve probably dreamt of starting out in investment properties so that you can slowly grow your property portfolio and then retire from your day job and live off the regular income of your portfolio.  But how can you start investing in properties, and what next steps can you take to build your property portfolio? Are there any major pitfalls to avoid and any great tips to get ahead?

Where to Start with Investment Properties

There are two main routes with starting in property investment, the buy to let and the house flip routes.  If you head down the buy to let route, then think of that as a long term investment. House flipping can generate a lot more cash faster, but you can’t keep doing if you want to retire from your day job because it becomes your day job and there’s no longer term return.

So often a good idea is to combine both approaches, by generating some immediate cash through house flipping and then once you have the funds available to start dealing with two investment properties at once, then diversify into purchasing a buy to let property as the second property to start to build up your long term returns.

Finding the Ideal House to Flip

The first property you buy is the all important one because the profit you generate from it can mean the difference between being able to then buy a better property the next time that can generate more profit, or having to flip another property before you can do that.  You should be aiming for a property that by the time you’ve added up all your expenses you’ve made at least 15-25% on it. So if you buy a property for $100,000, spend $30,000 on it and have other expenses of $5000, then you want to be selling it for $155,000 or more. This is certainly achievable if you pick the right house.

The right house is one that is one of the worst houses on one of the best streets.  You need to know what houses sell for down that street once they are fully renovated.  You may already know the area, but if not take a look at sold prices in recent years. Then calculate how much money you will need to spend to get this house looking like those houses that sold at the top end of the bracket.  You will know then if there’s enough margin to improve it, pay for your time, and have further profit to invest in the next property.

After flipping a few properties you should have enough funds to buy the next property outright without a mortgage, so when you sell this the profit made can be put down as a deposit on a buy to let property, or you could even keep the property you just renovated and mortgage it as a buy to let. 

Hopefully that’s helped you come up with some ideas.