Tips for Investing your 50k in Real Estate
You may have an extra £50,000 sitting on your bank account, collecting dust. Everyone knows that the interest that you can get from the bank is not enough to beat inflation. If you’re not sure what to do with your extra savings on your account, you may want to know about money-earning skills available out there. You can learn more about saving vs. investing in this site here.
Saving and investing are two different things, and the latter requires skills. You could always invest the £50,000 in the stock market provided that you are willing to face the risks. Nowadays, the market is volatile, and you can consider government bonds, but the returns are pretty low.
If only there’s another option that provides low volatility and higher return of stocks!
Then there are the rental properties. Studies from banks and universities have found out that nothing can still beat real estate over the centuries as it offers the highest returns of any asset class. It also has low volatility compared to traditional stocks.
As you are pondering what to do with your £50,000, consider the following ways on how you can enter the real estate market and get passive income every month.
1. Buy Turnkeys as Rental Properties
A turnkey house is a fully renovated one that investors can immediately rent out. The most common problem that many people say about this is that their cities are offering bad ROI or they don’t know how to find great deals.
Fortunately, a solution that is easy to do is to buy a turnkey. You can consider buying a house on the other side of the city, and they come with a lot of transparency. Obtain copies of appraisals, property history, inspection reports, and neighborhood market data on many internet platforms.
Getting the paperwork makes finding the properties that you can buy a whole lot easier. If you think that the UK houses are about £200,000, the good news is that you can get property investment advice from the experts and see the market through their eyes. They can refer you to apartments and condominiums that fit your budget, and you can start a rental business right away.
2. Buy a House, Do Renovations, Rent it Out, Refinance, and Repeat
If you are into long-term strategies, you can use the BRRRR method for buying, renovating, renting, refinancing, and repeating the entire process.
What makes this tactic so great is that you can pull the initial down payment from your first property if you choose to refinance. You can potentially finance almost all of your acquisition costs in the process.
Recycling the same £50,000 all over again while continuing to build income-producing properties can bring excellent results for you. An example is that a man bought a property for £50,000, put 10% down, renovated for £15,000, and then refinanced the entire thing for £75,000. The rent is about £1,000 a month.
Refinancing is the process of taking out a new loan to pay your original mortgage loan. Most borrowers tend to refinance when the interest rates on their original loan are falling, and they can reduce their monthly payments with longer repayment terms.
However, unlike buying the turnkey houses, this process may take a lot of time, energy, and effort on your part. You need to find the best deals out there, hire contractors for renovations, oversee everything, and finance the property twice.
While the BRRR strategy is a good one for people who have properties near their homes, this is not ideal for those who need to travel long-distance to oversee the renovation process.
3. Buy a Vacation Rental Home
Just because you bought a house, it doesn’t mean that you need to rent it for a long time to specific tenants.
In many markets, you will earn more when you use your property as short-term vacation houses. Know more about short-term leases here: https://www.forbes.com/sites/forbesrealestatecouncil/2019/07/01/what-you-need-to-know-about-long-term-vs-short-term-rentals/#74f127a23254 . You can use Airbnb for travelers, or you could lease it to corporate people or travel nurses.
It helps to know the area around the property and the revenues you expect for short-term rentals. Changes in cash flow should be monitored, and you need to see a report of the numbers to see if you are earning.