Soundbite Episode – I have less than £10,000 to invest in property, what are my options?

http://www.ispeech.org/text.to.speech

I often come across people that ask a question that goes something like this: I have £x,000 to invest in property, what should I do? Today, we shall consider how we could answer that question where x = £10,000 or less...it could even be zero! With no less than 6 different approaches covered, there is bound to be something for everyone with a lowish starting investment fund. Also, have your say in how the podcast shapes out going forward...we'd love to hear from YOU!

Podcast: Play in new window | Download

Subscribe: Email | RSS

Resources mentioned

Today’s must do’s

If you have a starting investment pot of less than £10,000 then consider which strategies outlined in today’s show may suit your personal situation the best. If you want to discuss some of the possibilities in more detail, then just get in touch.

Give us your feedback on the podcast by completing this simple survey / questionnaire

Please continue to send in your thoughts and ideas for content and themes that would fit into the 'New Beginnings' brief that I outlined for my upcoming YPN column: admin@thepropertyvoice.net

Subscribe to and review the show in iTunes…and while you are at it please help us to spread the word by telling all your friends too!

Send in your property stories, questions or moans to podcast@thepropertyvoice.net and we will try and feature YOU on the show too!

Property Investor Toolkit – here is the book link on amazon.co.uk & amazon.com in case you would like to get yourself a copy to accompany this series

Get talking!

Join in the discussion, either here in the comments section below, or by emailing us at podcast@thepropertyvoice.net

Start a conversation on Twitter with us @PropertyVoiceUK or on our Facebook page

Transcription of the show

Hello and welcome to another edition of The Property Voice Podcast, my name is Richard Brown and as always it is a pleasure to have you join me again on the show today.

This is the third part of the I have £xk to invest in property, what should I do mini series?

Today, we shall consider how we could answer that question were x is a much smaller sum of less than £10,000.

I did, in fact, change my mind if you recall how I signed off from last week…let’s keep it simple and look at one situation at a time…even if I bounced around the investment range a little bit. I guess that’s the upside of determining my own content schedule…and in my rather lame defence, I have not been that well over the past few days, so I hope you will forgive me for appearing just a little bit random in my sequencing here 😉

Speaking of how things are coming over to you, I have also started to collect some listener feedback on the show, so please listen to the end to hear how you can have your say in how The Property Voice Podcast goes forward. [or just click here right now instead]

Right now, though, let’s take a look at some options we might consider with little or no investment pot.

Property Chatter

As I said in the intro, we continue our theme of what to do if I have £x to invest in property, today looking at the situation where x = £10,000 or less.

So, our question is, if I have less than £10k to start, what are my options?

Let’s just remind ourselves of those the 3 main trade-offs that often need to be made when considering investing in property, they are:

• Money
• Time
• Knowledge

If we have a deficiency in one or possibly two of these areas, then we have to make up for it in the other one or two instead.

Having less that £10,000 available to invest in property does mean we have a deficit with regard to money. We may also have another of the gaps, be it knowledge or time. Today’s show considers the position where we will have at least one of the last two to work with. In all honesty, with a deficiency in all three…it will be near-impossible to start investing in property until that situation changes. However, in the meantime, we can make goals and plans to change that situation can’t we?

Where to start

To avoid sounding like a broken record, I will just summarise and if you happened upon this episode before the others in this kind of mini series, I would suggest that you have a listen to these to get the full picture behind these headline points.

1. Our purpose & goals
2. Our ‘When’
3. The Property Cycle
4. Our preferences, skills and lifestyle choices
5. Our strategy.
6. Finally, our action plan

So far, I have shared 7 possible strategies with a reasonable good sized investment pot of around £150k, then another 6 potential strategy ideas to consider using a £20k starting pot, so today let’s take a look at 6 possible approaches when we have a little or no investment funds then:

1. Build the investment pot

As with last time the emphasis is to try and grow the investment funds to get started sooner, or take advantage of strategies that require higher entry levels of funding such as flips and refurbishment projects.

I mentioned many of these last time, so here is a quick summary:

1. The budget & save approach
2. Fund-raising: by selling items of value to raise funds or raise equity from existing assets, including property
3. Additional income streams from a second job, home business or by renting a room out at home
4. Friends and family support

2. It all begins at home

As I mentioned last time, many an investor started with a DIY home project. I have spoken before about our home being one of the most tax-efficient property investments that we could make. With no capital gains tax to pay, a tax-free allowance on letting a room in our home and then lettings relief should we convert our home to a rental property, we can generate lots of tax-free income and gains that we can invest into our property business.

Sure, it may mean doing some DIY, or moving home frequently, but it can work. A variation to selling to release cash is, of course, to release the equity through remortgaging. Once again, the homeowner has the advantage with this type of lending as often LTVs are higher, interest rates are lower and sometimes permission to let can subsequently be agreed on favourable terms as well.

If we are fortunate enough to own our own home, then this can act as a springboard to our property investing activities. Even if we don’t own our own home yet, it may be worth looking at making our first investment into our ‘primary residence’.

3. Provide services to other investors

As a variation to the additional income streams point from 1c above, here we undertake property related services on behalf of other property investors. Of course, here we could be providing investor services that capitalise on our time or knowledge or perhaps both. Some examples include:

• Operating a lettings or property management business
• Undertaking project management on refurbishment and developments
• Helping to generate leads and inquiries or a full blown deal sourcing service
• Casual services such as undertaking viewings and even cleaning, laundry & meet and greet types of services
• Technical services such as EPCs, PAT testing & Legionella assessment, or inventories & floor plans,
• More professional or specialised services to property investors like surveys, building works, planning applications and specialist trades such as gas and electrician

The key aim here is three-fold: to earn a short-term income from a property-related activity, to gain or extend

• To earn a short-term income from a property-related activity
• To gain or extend our experience and then
• To open up opportunities in terms of potential deals and also potential partners to work with

…but hold that final thought for a minute.

4. The ‘Buy now, pay later option’

As with last week, another option is to look at another creative financing strategy, such as lease options.

If we find our own lease option deal it will avoid paying for a sourcing fee, or alternatively budget on spending between £3k to £7k for most lease option deals using a sourcer. I covered this option last time, so I won’t dwell on this again here.

5. Handling other people’s assets

Handling property that someone else owns is a creative property strategy. Here we look to generate our income or profit by adding value or delivering a service when using an asset we do not even own. Some examples include:

• Rent to rent – where we agree to rent a property from the owner and then seek to earn a higher rent often by changing the type of rental arrangement, say from single let to an HMO or serviced accommodation
• Assisted sale – where we help a property owner to sell a property at a higher sales price and take a share of the profit. This is typically used when we work with the vendor to improve the marketability of a property and get paid by the vendor.
• Lease options – as explained under a separate heading, entering into a lease option can allow us to secure the rights to use a property before we actually have to pay for it.
• Sale options – this is different to a lease option. Here we negotiate a purchase option price with a property owner, along with the right of assignment, and then find a buyer for the property. This often comes with an adding value strategy such as gaining planning permission or identifying development projects for example. It is often more of a short-term arrangement to generate funds. Here, we are usually paid by the buyer.

These strategies are time-consuming and require specialist knowledge in many cases to correctly execute. They can also be a part-time of even full-time job equivalent in some cases as well.

6. Team up and collaborate

If you remember, I mentioned the trade-off between time, knowledge and money a couple of times now. If we are short on one or more of these attributes, then we can try to plug this gap. Clearly, in this instance, our biggest identified gap is money. However, it could also be knowledge as well, leaving us with a one-legged stool.

If we have both time and knowledge, which can include experience and skills as well as technical knowledge and property education, then we have something to offer to someone that is cash rich yet time and / or knowledge poor. It may even be the case that our time alone may be enough to persuade a potential partner to collaborate with us under the right conditions.

I guess a third option is where there are three partners, one providing the money, another the time and yet another the knowledge.

Of course, any partnership arrangement needs to go beyond just these three elements, but they are the essential building blocks for a collaboration in property. Other factors to consider will include personal attributes, such as personal values and character, things like respect, trust and integrity. Equally, the numbers need to work all round, as does the end-game for the partnership – is it for a single project, a fixed period of time or an ongoing business venture?

There are many facets of teaming up in all businesses and that includes property.

How to find a suitable partner or partners is likely to be your next question. The best place to find potential property partners is through relationships and connections. This will include our personal circle of friends and family, business associates and acquaintances and then a wider expanding network of people we can and may engage with in ever increasing circles, such as through property events and communities, business and investment groups and so on.

It is not that easy, though, as each party in a potential partnership will have their own needs and personal interests to be met. It’s a little bit like finding a love mate…the length and quality of the relationship will depend on how much thought, effort and attention is invested into it! Perhaps best to leave the love mate analogy there, but I will leave you with the thought of the difference between a one-night stand and a lifelong marriage to let you draw your own conclusions!

As I mentioned last week with an investment fund of £20,000, having less than £10,000 to invest in property is not a lot of money when looking at traditional BTL say. However, as has been illustrated, there are still some options open to us should this be the case. We will have to pay a different kind of price, however. That price could be more time, applying ourselves to gain or use our knowledge, or it could simply be applying ourselves creatively and thinking a little bit outside of the stereotype of the large cash deposit BTL investor.

As I previously mentioned, I also started with only £10k only and adopted a combination of many of the items mentioned when I first started. The real trick was then to continue to grow the fund to go again and so having a sustainable business model cannot be stated enough.

So, if you have a small investment pot, there are still options open to you to get started…you just have to be determined enough to achieve what you really want to in property that’s all.

Wrap up

There we go then, another 6 alternatives that we COULD adopt if we have a starting investment fund of less than £10,000.

However, in true broken record style…we should always 'start with the end in mind' with our purpose & goals, as each of these potential strategies will suit some more than others, depending on their personal situation.

I hope that gives plenty of ideas to consider should you be asking yourself the question, what should I do if I have next to nothing to invest in property…relatively speaking of course.

This means we have now covered off three possible starting investment positions:

• Less than £10,000 today
• Between £10,000 and £50,000 last week
• Between £80,000 and £250,000 a couple of weeks ago

There will be some overlap at the margins of these values – there are rough indicators of course

Next time, let’s have a little bit of fun and see what we could do with some larger starting investment funds then shall we?

Before that, let’s just pick up on the listener survey briefly.

Your Voice

As you probably know, The Property Voice Podcast has now been running continuously for over a year now. So, I thought I should take that milestone as an opportunity to get your feedback on the ‘wells and betters’ of the show to date.

You can have your say by completing a simple questionnaire that we have put together using Survey Monkey, a useful resource in its own right incidentally. There is a link to the survey in the show notes, plus it will be posted onto The Property Voice Facebook & Twitter pages too. Finally, if you just want an easy life…ping me an email right now to podcast@thepropertyvoice.net and I will whizz you straight back the link to fill in the survey.

This is your chance to have your say on how we go forward, so please take a couple of minutes to help me to help make the show the best I can for YOU.

That’s pretty much all from me today then. By all means do drop me a line either by email or through the Facebook page if you would like to discuss these options in more detail. The show notes, are over at the website www.thepropertyvoice.net

Right now, though, I’d just like to say, thank you for joining me on the show again today and until next time on The Property Voice Podcast…it’s ciao ciao!