The Complete Guide to Property Investment Strategies • Smarter Property Investment

This guide will teach you about all the main property investment strategies out there, from long term buy-and-hold to short term buy-to-sell. The aim is to give you enough information about each possible strategy to understand if it is right for you and your circumstances.

This enables you to make sensible decisions when putting together your own Property Investment Blueprint: Your project plan on how to move forward with clarity and intention.

Note that the strategy that is appropriate to you will be dependent upon your own personal Time – Knowledge – Money (TKM) Triangle:

How much time you have to devote to property investing and importantly, in the oversight of your property business.
What knowledge you currently have in property investment.
How much money you have to invest.

Remember that generally speaking, the higher the return, then the higher the risk and probably the higher the management overhead and time suck that strategy will be.

Each property investment strategy will have its own summary of where it sits on the TKM Triangle given above.

I also include a chapter on Advanced Strategies, which are applicable to any of the property investment strategies mentioned here and can help turbo-charge your returns.

As a guide, if you are just starting out, then I would recommend you look at the simpler buy-and-hold strategies like single lets. Once you have some experience, you can move onto more complex investments such as HMO’s and Mixed Use investments or find suitable properties for a short term buy-to-sell approach, if you are looking to create lump sums of cash.

A Single Let is simply a residential property (whether a studio flat or a 5-bed house) let to one or more occupants on a single Assured Shorthold Tenancy (AST) agreement.

It is the easiest strategy to get going with and if you are new to property investing, it is my recommendation that this is where you start.

This chapter will cover:

The pros and cons of Single Lets.
My experience of having Single Lets in my portfolio.
Flat’s vs. houses. Hint: Flats are more complicated with Freeholders, Managing Agents, Section 20 notices and deteriorating leases to contend with.

Take me to Chapter 1: Single Lets >>

The legal definition of a House in Multiple Occupation (HMO) is a residential property let to at least three people, who are not from the same household, whom share facilities such as a kitchen and bathrooms.

A simple way to consider it is renting a property out on a room-by-room basis to unconnected individuals. Typically, you take a standard house of at least three bedrooms and rent each room out, often converting excess reception rooms into further bedrooms.

However, this is an oversimplification. There are amenity standards, potential licensing and planning rules to consider, not to mention different types of HMO’s (such as student lets vs. professional lets).

This chapter will cover:

Article 4 directive. What it is and what it means for HMO’s.
Types of HMO’s.
Licensing considerations. Mandatory, Additional and Selective schemes.
HMO amenity requirements.
Planning considerations.

Given the above, I would recommend you have at least 6-12 months experience under your belt as a landlord of Single Lets before attempting an HMO. It is not just me that thinks this way either, your lending options will be restricted unless you have at least 12 months experience as a landlord.

Take me to Chapter 2: HMO’s >>

Serviced Accommodation is the term for and short-term use of a residential property, whether that is a flat or a house.

Usually, such property is let on a timescale of a couple of nights to a couple of weeks, catering to holiday makers and the like. It is what I call a Yield Enhancement strategy, where increasing the intensification of use results in a higher yield than the property would achieve on a Single Let.

However, it is also key to note that this is moving into the hospitality sector and away from being a residential landlord. You will need to be able to provide the levels of service and response that someone paying a premium for a short-term let would expect.

This chapter will cover:

The difference between holiday lets and Serviced Accommodation.
Specification. You will need to provide everything, down to the teaspoons.
Management and response times. Welcome to the hospitality industry!
Flats: Beware of lease restrictions.
The implication for financing and insurance.

I would consider Serviced Accommodation a fairly advanced strategy due to the above. Again, lenders prefer to see some experience in this field. Your success relies on your management and service levels in order to get good reviews, attract other guests and gain repeat business.

Take me to Chapter 3: Serviced Accommodation >>

I am defining Mixed Use investments as a combination of residential and commercial lets within the same property. A common example would be a freehold building with a commercial unit on the ground floor (such as a shop) and one or more flats above, with the shop and each flat let on separate tenancies to different occupiers.

Generally, these fall into a small niche. Most residential investors shy away from the commercial element. Similarly, most commercial investors shy away from the residential element. This means you will often find competition for such properties is lower than for residential property. The balanced yield across the whole property will often fall somewhere between a residential buy-to-let and a pure commercial investment.

This chapter will cover:

Stamp Duty Land Tax: It’s different (and cheaper).
Commercial Letting Agreements: They are in the landlords favour.
How getting the right tenant enhances the value without doing anything else.
Funding implications: Into the realm of commercial finance.
The Golden Rule I look for when investing in such property.

Take me to Chapter 4: Mixed Use Property >>

Commercial Property is basically any unit that is let solely to a commercial tenant for the purposes of conducting a business.

This can be a shop, dentist, office, warehouse and so on. It covers individual units all the way up to shopping malls bought by large commercial property funds.

This chapter will cover:

Why the quality of the tenant and the lease is everything.
How commercial property is valued (it’s not like residential property).
How it can be very lucrative but carries risk (voids can feel like forever).

I place this type of investment firmly at the advanced end of the spectrum as it is really a different beast from residential letting and I am betting that most of you are primarily interested in the latter. I do not own any pure commercial property. I prefer the Mixed Use investment case, where the more consistent and steady income from the residential units help smooth the often more lumpy cashflow from the commercial element.

Take me to Chapter 5: Commercial Property >>

Build to Rent is what you would expect: Building property (usually a block of flats) for the purposes of retaining and letting out.

This chapter will cover:

The challenges you face in undertaking such a project (and deep pockets is only one of them).
The economies of scale you can benefit from with this strategy.
The multiple exit options you will have the luxury of.
How you can add value by building a brand.

This is another strategy firmly at the advanced end of the spectrum, requiring the combined knowledge of:

Sourcing suitable land.
Gaining planning permission.
Managing the construction process.
Financing the build and refinancing onto an appropriate term mortgage.
Managing the units as a rental portfolio.

Take me to Chapter 6: Build to Rent >>

Commercial Conversions have gained huge popularity in recent years, primarily because of something called Permitted Development Rights. These rights cover a whole spectrum of things (including the right to move from C3 residential use to C4 HMO for up to 6 people, unless the Article 4 direction is in place, which removes the Permitted Development Rights).

For commercial conversions, we are primarily interested in the Permitted Development Rights that allow you to convert an office building (use class B1) into residential units, with only prior approval required from your local authority, rather than full planning permission.

The driver for this is to increase the number of homes being created using surplus office building stock that might otherwise lay empty and unloved.

This Chapter will cover:

What Permitted Development Rights mean for Commercial Conversions.
The Prior Approval process.
The (considerable) risks inherent in the process.
Funding, refinancing and future options with the completed building.

It should be no surprise that you need deep pockets to take on a commercial conversion, a good understanding of the conversion process and a meticulous knowledge of the risks you face. It is clearly at the advanced end of the spectrum when it comes to property investing strategies.

Take me to Chapter 7: Commercial Conversions >> [Coming Soon]!

Buy-to-Sell is a short term trading strategy. Put simply, it is the act of:

Buying a property.
Adding value (usually via a refurbishment).
Selling it at a profit.

It is a good way to generate cash lump sums – if you get it right.

This chapter will cover:

Why it isn’t so forgiving as buy-to-hold.
The factors you need to consider when sourcing an appropriate property.
The importance of a Plan B.

Because you are trying to generate profit in the short term and hence the process is much more sensitive to error, this is more risky than a simple buy-to-let. However, if you buy well, manage the risks and are accurate (and honest) with your analysis, a normal refurbishment buy-to-sell is within the capability of most.

Take me to Chapter 8: Buy-to-Sell >>

Oooh, advanced strategies! Actually, it is a bit of a misnomer. Many will consider the stuff covered in this chapter as a strategy, but I think of them as tools. When the situation fits, they can be very useful and powerful.

However, if you go around thinking of them as a strategy, then you will find it difficult to source properties that will be applicable. There is the danger that when all you have is a hammer, everything looks like a nail …

But used correctly, this is another string to your bow. Think of them as useful additions to your property investors toolbox, to be used when the situation fits.

This Chapter covers: