How to financially empower yourself by investing in property (even if you think you can’t afford to)

Love the idea of investing in property but don’t know how to start – or even whether you can afford to? Here’s a professional guide to help you get started.

Are you happy with your finances? Do you feel financially secure? Do you wish you had more money?

If you answered ‘yes’ to any of these questions, you’re not alone. Too many women in the UK and beyond are unhappy with their financial situation, but don’t know what they can do to break the cycle. 

But what if I told you that you have all the tools you need to improve your financial situation already, you simply need to give yourself the opportunity to succeed? 

As a former wealth and investment adviser, I’ve helped clients from a range of backgrounds and financial situations achieve their dreams, from high net worth individuals to those looking to make their first foray into the world of investment.

And property investments are top of my list when considering where to invest. I like the fact that a property is a tangible asset you can see and touch, you can use leverage (prudently) to increase returns, you can obtain both capital appreciation and income, rarely do you expect the value to go to zero and the returns achievable, even in today’s market, comfortably exceed those of most of the major asset classes. 

Investing in property shouldn’t be just for the wealthy or those with a background in the sector. Property investment should before anyone seeking to maximise their income and striving to reach financial independence. 

Curious about how to get started? Here’s what you need to know. 

Why invest in property? 

It’s no secret that astute property investments can result in significant profits, but property should be viewed as a long-term investment rather than a short-term flurry. 

Over the past 10 years, returns on property investments (when leverage is included) have been greater than other asset classes, such as stocks and shares. Additionally, owning a tangible asset like property is often preferable to an investment you can’t see or touch.

The key to investing successfully is doing your research. If an investor has done their homework, when a property is bought with the intention of renting, the rental income leftover after all costs should be cashflow positive. The investor will also be able to benefit from capital appreciation, if the value of the property rises over time. 

Having an asset that produces income and increases in value over time is ideal. However, optimising for both can be difficult, and typically you have to choose which to focus on – the properties with the highest rental yields tend to be in areas of lower capital appreciation and vice versa. But it is still possible to achieve both. 

Why you can actually get a better return when you buy with a mortgage

If you purchase a property with debt (a mortgage) rather than buying outright in cash, as the value of the property increases, your return on your cash invested is higher than it would otherwise be, due to the leverage used.

For example, if you buy a house in cash for £100 and it increases in value to £150, you’ve made a 50% return of £50. If however you bought the same house with a £70 mortgage and £30 cash, your return, after paying off the mortgage is £80 – a 266% return on your initial £30 investment. This is the power of leverage.

The two things wealthy people have

Property investments also give you options. Whether you choose to purchase and manage a buy to let property or invest in a crowdfunded development, property can become a passive income stream, one of the secrets to accumulating wealth.

Having spent years advising wealthy people, two things became very apparent to me: wealthy people have multiple sources of income, and the wealthiest people tended to have a lot of wealth from property.

How you can take a nest egg and turn it in to a property portfolio

The secret to a successful property portfolio is knowing what you can afford, where to buy, what property strategy to follow and which type of property to purchase.

Once you know how much money you have to invest, you need to consider total costs, not just the purchase price. People can forget stamp duty, renovation costs, ongoing maintenance, mortgage costs etc. You’ll also need a property manager so there are management fees too. These things will need to be covered (ideally by the rent, with some money left over as profit).

People assume buy-to-let properties and houses of multiple occupation (HMOs) are the only options available to them. But there are in fact a range of different property portfolio building strategies, some require much lower capital outlays than others – like the rent-to-rent strategy.

The rent-to-own strategy is also a good one, especially if you want to own a property in a prime location. Take Toronto, for example. Condo prices in this city have skyrocketed through the years, and will likely continue to do so. If you want to buy but you don’t have the money yet, you could opt for a rent-to-own condo in Toronto which could be more manageable for you.

Which strategy you should follow depends on your personal circumstances. Investors can maximise their spending power by leveraging their equity and taking on debt when they purchase.  

If you don’t have a nest egg of cash tucked away, another option is to release equity from an existing property. Known as remortgaging (if the property already has a mortgage), this involves taking some cash out and using that cash to purchase another property.

When to consider releasing equity to buy another property 

Thinking of releasing equity in a property to buy another? Here are the signs the time might be right:

  • When you can afford to. Speak to a mortgage broker about whether you will be eligible for a remortgage to make sure you can afford repayments. 
  • If property prices in the area have risen substantially since you obtained your first mortgage.
  • If rental yields have increased in the area.
  • After you’ve thoroughly researched the area in which you would like to invest.
  • After you’ve developed a long-term investment strategy and you understand the market in relation to the strategy you’ve chosen to follow.

If your nest egg isn’t quite there yet and you can’t afford to purchase a property, or maybe you don’t want to own a property, there are still ways to invest. Crowdfunding enables people to invest in property with small sums, in some cases as little as £100. Crowdfunding can be a great way to get started in property investment.

If you’d like to learn more about achieving financial freedom through property investment, find out how PropElle, a community in which women are empowered to achieve their financial and lifestyle goals through property investing can help you.

Photo by Jordan Bauer