How to make money from property

I graduated from university with a commercial property degree and even then thought the only way to be a property investor was to have a bucket of money.  Not true.  There are many ways to make money in property without having a bucket of money.  The method I’ve used the most is by working with investors who loan money to me (or my company) for a fixed amount of time and a fixed interest rate.  I use this to buy, refurbish / convert a property then refinance at the now higher value with a long term mortgage lender.  This money goes towards paying the investor back.  I go into this process in more details in other articles, but once you’ve mastered the funding part of property investment, you can look at all the different ways to actually create value in property:

At its most basic, property investment can provide two primary sources of returns:

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Income 

regular payments from a tenant or guest

Capital Appreciation 

an increase in the property’s value

Income through Property

The first, and perhaps the most straightforward way to generate income through property investment, is to lease or rent it out. By charging tenants or guests for the use of your property, you can enjoy a steady inflow of income, typically on a monthly basis. This could be through a fairly straightforward buy-to-let strategy (which can apply to residential or commercial property), operating as an HMO (house of multiple occupation), or as serviced accommodation (which is commonly referred to as Airbnbing a property).  You can also go down a slightly more niche route of renting out parking spaces by using websites like JustPark or Your Parking Space.

Essentially if it’s any form of property or land and there’s a demand for it, you can monetise it and start building your passive income streams.

Capital Appreciation

Capital appreciation, the second significant source of returns in property investment, involves an increase in the value of your property asset over time. Unlike rental income, capital appreciation provides a return on investment (ROI) when you sell or remortgage the property at a higher price than what you initially paid for it.  The “over time” part can be quick or slow depending on your strategy:

1. Waiting

With time, property values tend to increase. This rise is often linked to inflation, overall economic growth, and increasing demand, especially in high-growth or high-potential locations.

2. Redecorating or Refurbishing

Improving the aesthetic appeal and functionality of a property through decoration or refurbishment can enhance its market value. This could involve anything from a fresh coat of paint to a complete kitchen or bathroom overhaul or even making the layout more space efficient.

3. Redeveloping

More significant than refurbishment, redevelopment could involve transforming a property’s use – such as converting a commercial property into residential flats – to increase its market value significantly.  

4. Extending or Building Up:

Adding extra square footage to a property, either through a loft conversion, basement excavation, or rear extension, can increase its value. Planning permissions and building regulations apply here.

5. Splitting the Title

This involves dividing a larger property into several smaller ones, each with its own title. This can often give you higher total values than the original undivided property. e.g. a four storey house being split into 4 flats in the right area can often be worth more than the building as one property.  In the wrong area it can be the other way around, so conversely, the opportunity could be in buying multiple flats and combining them into one house. 

6. Extending the Lease

For leasehold properties, the value can often be increased by negotiating an extended lease with the freeholder.  This is usually when it falls below 80 years remaining on the lease. (n.b. if you already own a leasehold property, be sure to extend the lease well before the point at which there are only 80 years remaining!) 

7. Making a Property Mortgageable

Rectifying issues that prevent a property from qualifying for a mortgage — such as dealing with subsidence, removing hazardous materials, or securing necessary permissions — can increase its value, as it opens up the pool of potential buyers.

Structuring Your Property Deal

Interestingly, you don’t necessarily need to own a property outright to reap these benefits. Various deal structures can provide you with income or capital appreciation. For instance, property options and rent-to-rent deals can allow you to control a property and profit from it without having to purchase it outright.

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