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3 Strategies to Build Your Property Investment Cash Pot

ninja learning Nov 05, 2020

The biggest challenge for property investors is cash flow.  First you have to have a chunk of cash to get started - and then your cash is trapped in the property you purchase.

If you have aspirations to become a buy-to-let (BTL) landlord, then you need to find a way to build your portfolio - without it taking years.  That’s the route to quitting your day job and being able to live comfortably off your property investments.

Here are three ways to invest make quick profits and get your money out fast.

1: Flip

This means you buy a property and sell it at a profit as quickly as possible.  Why isn’t everyone doing this?  Because some people see it as too risky - but with the right finance strategy, it’s not as risky as they think.

You may refurb a property to improve its value - but some people don’t even do that.  If you can find good bargains at auction it’s actually not that difficult to resell properties at a higher price, even without any refurb being done.  In fact, some people put their properties right back into the auction room and still make a profit.

Use bridging finance to make your purchase, and stash the profit from the uplifted selling price in your bank account to build your cash pot.

2: Find a motivated seller

People have all kinds of reasons to sell their properties.  Some are happy to be in a chain (well, maybe not exactly happy, but willing to tolerate it) and wait for as long as it takes (often many months) to actually complete on their property.  But not everyone is like this.

  • Motivated sellers may have to move for work reasons - that means they need to buy their new home and don’t have time to mess about waiting for the chain to resolve.
  • Motivated sellers may have just gone through the trauma of a divorce and have to sell the family home to split the money. They just want to move on.
  • Motivated sellers may be a family with a property through probate, that needs to be sold to distribute the funds according to the Will.
  • Motivated sellers may have retired and are moving to another area - and just want to start their new life.

These are just a few situations, but they’re all often willing to accept a lower price to get the deal done. 

Use bridging finance to buy and remortgage at full value further down the line - at full market value.  You get your money out and build your cash pot for the next purchase.

3. Find unmortgageable properties

If the property is unmortgageable the vendor will know they can’t ask full market value as their only potential buyers will be people who can buy for cash.  Nobody pays full price when they’re paying in cash.

If your negotiation skills are well developed - and you know how to release the potential in a currently unmortgageable property - you can get some fantastic deals.  If you can buy as much as 50% below market value, using bridging finance based on full market value - then refurb the property to make it mortgageable, you’ll get your money out and a healthy profit when you refinance.

Clearly, there’s a bit more to these strategies than I can cover in a short blog - but in essence they are all do-able; all you need to do is learn the details.

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