Do set your GOALS high this year for getting yourself on the property ladder. The forecast is 2021 is a good year to get into property as we see the market soften especially after the March 31st stamp duty deadline. Even if the market doesn’t dip, you will still find opportunities within the market as long as you are willing to work with prospects (home owners, investors, landlords, agents etc ) to come to a win-win solution that favours both parties. With information so freely obtainable, and the world getting increasingly more social, it is now easier than ever to get started, immersing yourself in knowledge and forming strong networks and alliances that you can leverage on to get on the property ladder.
We have covered how you should get your paperwork in order and start getting ready. Now, its time to work on your alliances, and aim to buy at least 1 property this year.
Even if you haven’t saved up enough, start working on these ideas to get yourself started
1. Buying with friends
My first ever property was a joint venture with a friend, and we weren’t even that close at the time and that experience propelled both our lives in an amazing direction, we have both built our 6-7 figure businesses, we both quit our jobs and are completely grateful for the new experiences we have running our own businesses. It wasn’t rocket science, we started small, we supported each other and worked within our strengths. We each brought things that were valuable to the partnership and we leveraged on our salaries, funds and bought our first property. we had very clear guidelines and I cover it all in “How to buy property with friends” or find out about how you can be a part of our Earn as you learn investing strategy to get the knowledge first.
2. Crowdfunding (EARN AS YOU LEARN)
There are investment projects available to those looking to invest passively but also gives you the opportunity to learn as the process unfolds. It works perfectly as a back door route to learning more about how investing, developments and the entire end to end process works. It is a great opportunity to invest and learn through the stages of the full cycle of development which then earns you a return on your investment as well as gives you more insight into the areas of investing you would never have learnt otherwise.
As part of my development projects, there is an option to find out more about how we can work together, the potential rates we offer and how the process works. We incorporate open days at the project where investors can get guided tours and lessons on the strategies, how decisions are made and are actively involved in the process. It is indeed a great way to build up insider knowledge into property investing with as little as 10-20K investment. To find out more about our current projects you can indicate your interest here.
3. Releasing equity from your parents, siblings, or family home.
This strategy is great for people who have access to people/family (including extended family) with property, assets or stashed away funds that you can lobby to create a win-win proposition. It does require delicate handling as there are often inheritance issues to deal from the onset.
You’ll need to determine if it will be a clean cut loan you pay back with interest or an equity share. If you’re raising it against a family home and you have siblings these need to be clarified from the onset. Also, with extended families, you will want to ensure you bring them on board and seed the idea of investing with you over time.
Most people are wary about dealing with family due to the complications that can ensue but it is by far the easiest access you can have to large sums especially when you haven’t built up much experience or credibility. You will need to demonstrate some track record or you have gotten educated on potential strategies and then package your ideas by starting with small bite sized, easy to understand projects that slowly get them more inclined to invest with you.
4. Forming an investment club for 3-4 people
This is a hugely popular way to get started with relatively low start up capital but that gets you started in real estate. It takes time and effort but initially, you can start putting together an investment pack which helps you approach trusted friends and family to come together to form an investment club where you pool your resources to form a larger pot which can then be built up to work on larger projects than each of you would have individually carried out.
You can have up to 4 people on a title deed with each of you contributing towards the purchase. You will need to identify roles, such as management, admin, decision making, amount contribution and joint venture arrangements as part of your arrangement. (It is important to note that they must be friends and family so you don’t end up in breach of Financial Conduct Authority rules). Also, make sure atleast one person has a good knowledge and experience in property investing (or find a mentor to guide you). As you are now investing other peoples funds, you need to demonstrate proficiency and ensure that your investment choices and due diligence are well thought through.
5. Government Help to buy schemes
These are a great alternative way for 1st time buyers to acquire property. If you earn a certain bracket and you’re buying for the 1st time, you can apply for a Help to Buy equity loan where the government contributes up to 20% towards your home purchase and you only need to raise anywhere from 5% up to a maximum of 20% of your portion of the deposit. It is mainly available for newly built homes and you will need to pay back this loan (in addition to the mortgage itself). Just note that the current scheme is set to end March 2021, but there’s a new one to replace it from April 2021 and run until March 2023. The new scheme introduces property price caps and is restricted to first-time buyers. My only caveat with this scheme is that new builds can often be overpriced relative to the market and since this offer is restricted mainly to new build developments it means first-time buyers who qualify will be tempted to overpay just to get on the ladder. Be definitely be aware of the local house prices in comparison to the price offered for the new built home when making a decision and make sure there isn’t too much of a disparity with homes in the area to ensure you’re paying as close to market value. Overpaying to get on the property ladder is never a strategy I suggest but if you must, be aware it only only works in an upward trending market, otherwise you’ll find yourself very quickly in negative equity which becomes difficult if you ever need to sell or remortgage the property
The amount you pay for a home depends on where you plan to buy. Check out the website for more information. https://www.helptobuy.gov.uk/equity-loan/equity-loans/
6. Second charge loans/ Loans/Credit card:
I say to do this very cautiously (and always obtain advise from a professional finanicial adviser before you take out any loans or credit). You should be very careful when investing with loans and higher risk funds, bridging loans etc because you run the risk of not just losing money, assets but then risky your personal assets as well. You must have a clear plan for repayment (and a back up plan if possible).
With credit cards, you should always check if there are any zero percent interest offers for 1 year so you have time to payback as well, but I’d say you shouldn’t plan to use credit cards as if you can’t pay back it as it can lead you into a lot of problems.
I’ve taken out unsecured loans to complete the balance on a below market property purchase, or for refurbishments for uplifts because I know I can pay it back after I have refinanced or slowly over many years (if there is a financial case for this). You can take out secured loans as well against your assets, but again be aware that you need to have a plan to pay it off so you are not over leveraged.
There are so many creative options now, that there is honestly no longer any excuses for inaction.
For more clarity on any of these strategies, you can reach out to me to discuss.
