Have you ever heard the phrase cash is king? Well in property investing cash flow is king. We have spoken about flipping property for quick returns and the effort involved in doing so.
Now we need to talk about cash flow which you create each month with rent received. Buy to lets or BTL’s are by far the most popular forms of cash flow and if you can average around £200 per month profit on each single let then you are doing well. This all depends of course on the size of the house and the mortgage payments etc. but let’s work on the average for now.
If you have a day job where you earn circa £35,000 per year then you will be getting a net salary of just over £2,000 per month. In short to replace this you will need at least 15 single lets to cover your salary taking into account any unexpected challenges that may come up.
Finding 15 below market properties with £200 per month cash flow is achievable and you can earn a pretty good income from this.
There are other ways to create cash flow much quicker and I’ll outline a couple for you.
These are examples of what we have done and continue to do today. Real life examples for you to learn and copy.
Rent to Rent is very popular now given the excellent returns and relatively small investment needed to get started.
What is rent to rent? The short version is that you go out and find a ‘primary’ landlord who has a property that they no longer wish to manage and are willing to offer you, the ‘secondary’ landlord a reduced rent per month to take over the property. You then manage and rent out the property yourself and your profit is the difference between what you pay the primary landlord and what you are paid by the tenants.
There are some key points you will need to cover off before committing to such a deal. One of these is that the primary landlord must be able to ‘sublet’ to you and if they have a mortgage this is simple to find out. Is they own it outright then there should be little if any issue with this.
Primary rent is £1,200 per month
Property actually rents out at £2,500 per month
Your profit = £1,300 per month.
What you will also need to agree is maintenance. We have agreed with most primary landlords that we will cover all repairs etc. to £100. Anything above is covered by the primary landlord or insurance.
If you had 15 of these properties then your income would be £19,500. Sounds a little better.
Another way to create cash flow is by converting residential properties to commercial properties.
We have done this successfully with residential homes and guest houses.
Guest house value is £210,000
As an HMO with 8 rooms we can rent this out at £42,000 per annum.
What you need to do is obtain change of use from the council to an HMO. Once you have this then you will need a re-valuation as an HMO. Assuming the HMO is valued at gross rent then you will have a minimum value of £336,000 depending on actual yield and some other factors.
This creates a zero money down deal if you are able to obtain the property with an option.
1 for the option
£350 for the planning
£65 we spent on plans to be drawn. Yes £65.
Survey around £650
All in £1,066.
Annual rent is £42,000 or £3,500 per month
Minus the utilities etc. of around £700 per month
Cash flow = £2,800
Even if you had to mortgage the property at the entire £336,000 it would only be £1,500. This would still create a £1,300 per month cash flow.
15 of these at £2,800 per month would be £42,000 per month.
Which one would you prefer?
Which one would you most like to learn?
If you would like to know the details and learn how to do these deals please contact me at firstname.lastname@example.org or join me on my beginners day for property investor newbies which I run twice per month.
There is also a load of free reports available which you can get by clicking on this link http://thepropertyinvestorcompany.co.uk/property-investor-newbies/?
Yours for property profits