A career in property investment can be extremely fulfilling, combining so many different skillsets in a single project with the potential for a fantastic financial outcome. From testing your creativity to strategic decision making, market research, an eye for detail and financial competency, you can really push yourself to the limits with this career path. The main benefit for many people is that you can gain complete freedom and be your own boss, with many successful property investors being able to retire or take a step back much sooner than more traditional careers.
As a college student, knowing where to begin can feel overwhelming, especially as the financial requirements to start a property investment business is significant. However, everyone has to start somewhere, and we’re here to guide you through those initial stages to understand how to get started to help you reap the benefits of a career in property development.
Where to begin?
The first thing, and most realistic thing, you need to do in order to start a career in property development is to set savings goals. Quite simply, you need money to get into property investing, but where do you start? The initial goal should be to get one property under your belt, perhaps with the goal of doing it up, selling it, then using the equity you made on that house to move onto your next project. Another option is to buy, renovate, let it out as a rental property, and then remortgage to release the equity you have, to then invest into a second property at some point down the line.
Some people will live in the property whilst renovating which is ideal because you avoid paying rent on top of all the costs that come with a renovation, so this could speed the process up slightly for you and maximise your return when you are doing up the property. You also need to consider realistically how much you are able to save, which will all come down to how much you’re willing to sacrifice in order to get your property. If you want to save up in a year, it might require you moving back in with parents, working an additional job, and not going out drinking or on holidays for 12 months to get there. For other people, they want more balance, so it might take 3 years. We’ll get into all of this throughout the blog, starting with how much you need to get started when it comes to property investment.
How much do you need to start in property investment?
So, how do you save for that initial property? Firstly, consider where it is you’re wanting to buy and look at the average house prices in the area. Purchasing a property in an expensive area will not only be harder for you to initially make the purchase, but it will be more difficult to make a good amount of money on it. Whereas if you purchase a property near nicer areas in an up and coming spot, and the property needs some love and care to get it up to scratch, you’re much more likely to make a good return on the property. Before you jump anywhere near making an investment, when you’re saving, spend the time to really get to know the local market and all regulations that are required for your investment goal. Speaking to a local property investment agency like CityRise can be really valuable to guide you through the process and to point you in the right direction in terms of profitability and return on your investment.
You may look at the lower end of the spectrum for your first investment, if it has the potential. Lenders are now increasingly accepting 5% deposits with the rest being in the form of a mortgage as a loan for buying property, making the market even more accessible. Say the property is £150,000, so the 5% deposit would be £7,500. Then, you may need around £10,000 for the renovations, so you’ll need £17,500 saved, ideally with £2,500 in a contingency fund for unexpected expenses. This is £20,000 required for the investment, however depending on the potential, you could increase the value of the property by £30,000. Then, say you live in the property for a year whilst you’re renovating, you will also come out with around £7,500 in equity from your mortgage payments, along with the £7,500 deposit. So, you could be coming out of the project with £25,000 in profit.
Also, an option is to keep that property, get it valued, remortgage to release the equity you’ve made from the property, then you’ve got that £25,000 to put into another property. Make sure you take into account things like stamp duty when you’re purchasing a second property.
How do you save for an initial property investment?
In terms of saving the £20,000, this is the tricky bit. Figure out how much you can spare each month and see if there’s anything you can do to push that further, such as picking up extra shifts, or creating a strict budget to cut back on holidays, going out, etc. This all depends how quickly you want to save and how much you are able to, or if you have the time to earn more money. For example, if you wanted to purchase your first property within 2 years, this would require around £830 a month to be saved, so you may need to move home with parents, work extra jobs etc. If you’re willing for it to take longer, 3 years would require £555 a month and 4 years £416 per month.
Purchasing your first property and getting on the ladder is absolutely the hardest bit, and for some people with other financial responsibilities it will take longer, however figure out how much you need to invest, how long it will take you to save that, and think about ways to cut back your spending to reach your investment goals sooner.
Final Thoughts
Once you’re able to get over the initial hurdle and get that first property, things become much easier, so having a clear plan on how to save and make the first investment profitable is key to ongoing success. There will likely be difficult times along the way and lots of learning, but just take your time with each property and then you’ll have a clearer idea of how to move forwards onto the next step.