Strategies For Building An Extensive Property Portfolio With Little Capital

With mortgages harder to obtain, more people are interested in the prospect of building a property portfolio with little initial capital outlay.  If you have money languishing in a bank account and earning very little interest, here are two strategies you could consider:

Lockup Garages

Whilst not the most glamorous of property investments, lock up garages require small capital outlay, are low maintenance and fairly hassle free. Choose the right area and it is fairly easy to realise a 10% return on your initial investment so can represent a good investment return. Garages very often appear in property auctions with low guide valuations. Currently, five lock-up garages are being advertised in Gosport for a guide price of £15-20,000.

Depending on location, garages appeal to people for storage, to store a convertible or classic car, store a motorbike, general storage of household goods, a boat, or sports equipment. If the garage is located in an area where parking can be a problem, local residents or businesses may be interested in renting the garage for their own parking needs.

Buying at Auction

If you have a little more money to spare, bargain properties are still available via property auctions. Repossessions or properties requiring renovation are commonplace among auction listings. Bargains can be found that could represent ideal investments. Currently, a seafront flat is being listed with a guide price of £20,000 at a property auction house. You may still need to seek lending to complete the sale (ensure this is in place before the auction), however, these prices are equivalent to some deposits needed to purchase even the smallest of properties in other areas.

Here are some tips when buying at auction:

  1. Are you in for the short or long term investment? Property investment can be a waiting game, particularly in slow markets. You may have to rent out a property for some years before realising any real return on your investment. Don’t assume a property will sell quickly.
  2. Exercise caution with auction properties. The majority of properties are being listed at auction, having previously not sold via estate agents. There can be many reasons for this, so make it your business to understand why the property you are interested in is an auction lot.
  3. Avoid buying blind. Know the area you are purchasing in. Is it a good letting area? Is the area in demand to buyers? What condition is the property? Are there issues relating to the structure? These are all things to bear in mind.
  4. Obtain a structural survey of the property. Most lenders will not lend without it, but buying a property without having knowledge of its structural condition is a real gamble.
  5. Be prepared to spend money on the property to renovate it and remember to set a budget and stick to it. Take into account costs of borrowing, insurance and loan repayments during renovations.
  6. Don’t spend too much. Know the property values. Don’t overspend unless you are confident you will obtain a return on that investment. If you are planning on renting out the property, ensure you install fixtures and fittings likely to survive the treatment of tenants or that can be replaced inexpensively.
  7. Get friendly with your local estate and letting agents. They know the market. They will be able to guide you on potential values and rents you can expect to realise from your investment.
  8. Read the legal pack. Some properties are sold with short leases – making them unattractive lending prospects. Some state that the purchaser has to pay the auction costs. It is always worth reading the legal pack, or better still, ask your solicitor to read through it so you aren’t caught out by any clauses.
  9. Are you buying to sell-on or buying-to-let? This will have an impact on the type type of property you buy and how much you are likely to spend on the property post-sale.
  10. Develop good relationships with tradesmen. This will be invaluable if you plan to renovate and resell regularly.

By investing little initial capital, you can help your savings go a bit further. Whilst the property market isn’t completely fool proof, following these tips will help you avoid common pitfalls and realise more value from your funds.

6 Responses to Strategies For Building An Extensive Property Portfolio With Little Capital

    • This post was from a guest post – but I am thinking REITs will be where I start to get my feet wet when it comes to real estate investing. After the recent house closing not sure I will have the capital anytime soon for a 20% downpayment

  1. Investing in real estate is definitely something I plan to do. These are great tips to begin my research, etc. for how to make my plan a reality!

  2. My husband and I own two houses – one that we rent out and one that we live in (plus rent out a portion of it). We often talk about the idea of purchasing a self-storage facility. Every time we drive by one we say “we need to buy one of those someday”. Maybe we’ll take the plunge in the coming years…

    • I LOVE the self-storage facility business model. There are publicly traded options that may make it a bit easier for you to get involved. Ever look at those?

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