The Property Voice

Soundbite: How much capital do I need to start?

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Today, I wanted to answer the question…how much cash do I need to get started in property? When most people say property, they tend to mean BTL, so I shall certainly start by looking at BTL. However, as you will see, we may take a quick look at a couple of other options that require less up-front cash to BTL along the way.

Resources mentioned

Mini-series on what to if I have £x to invest in property:

  • Less than £10,000 available to invest here
  • £10,000 to £50,000 available to invest here
  • £80,000 to £250,000 available to invest here
  • £250,000 or more available to invest here

    • Alternatively, drop me an email: [email protected] and I will send you the ebook equivalent to the episodes you are interested in instead – state how much you have available to invest and I will make sure I send you the right ebook

    Our Deal Tips Service is you want to find decent ROI property projects in a passive way

    Link to the Podcast feedback survey

    Today’s must do’s

    If you want to get started in property consider one of the following approaches: 1) being committed and creative in saving or generating funds for your deposits and fees; 2) looking at alternative ways of getting going such as lesser capital strategies, giving up some of your privacy or giving up some of your time to overcome inertia, or 3) make your funds work harder for you by adopting a value-adding or recycling approach to your investment plans.

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    Send in your property stories, questions or moans to [email protected] and we will try and feature YOU on the show too!

    Property Investor Toolkit – here is the book link on amazon.co.uk & amazon.com

    Get talking!

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    Transcription of the show

    Hello and welcome to another episode of The Property Voice podcast. My name is Richard Brown and it’s a pleasure to have you join me on the show again today.

    Today, I wanted to answer the question…how much cash do I need to get started in property? When most people say property, they tend to mean BTL, so I shall certainly start by looking at BTL. However, as you will see, we may take a quick look at a couple of other options that require less up-front cash to BTL along the way.

    Let’s get into the discussion now then.

    Property Chatter

    OK, so how much cash or capital do I need to get going then?

    Well, traditional BTL requires a deposit for a mortgage and some extra funds to cover some of the fees. So, even if we buy a cheap and cheerful property, we will probably will need at least £20k in capital and that’s assuming no refurb work is required. However, that may mean investing in a 2-bed terrace in a grim, former mining village and that might not be the best investment to make either! So, there is an element of trade-off required and that’s why raising more than this could be beneficial if we possibly can.

    There are actually two challenges when it comes to traditional property investment through BTL – raising the starting capital and then raising the capital for the next one all over again! BTL is a highly capital-intensive pre-occupation that’s for sure!

    However, there are some things that we could do to help us to raise that starting capital, although some may not be possible or even preferable, but here goes:

    • Aggressive saving – and I mean more than the 5% to 10% of earnings…some people have managed to save 50% of earnings!
    • Budget slashing – in harmony with saving, a severe review of our spending habits and potentially going on a spending fast for a time, no holidays, no meals out, no expensive TV subscriptions, no branded products, no second car, no first car, no new clothes…you get the picture – this is called delayed gratification by the way.
    • Additional income streams – consider second jobs and home-based businesses, such as becoming an eBay or Amazon seller or doing car boot sales, that kind of thing
    • Liquidating assets – selling off valuable or semi-valuable items to help raise some cash…old watches, art, antiques, record collections and so on
    • Equity release – accessing equity in our home by refinancing, downsizing or even switching to renting for a time…yes another short-term sacrifice
    • Additional borrowing – raising money by borrowing through unsecured lending, friends & family or other joint venture structures

      • I didn’t say it was going to be easy did I? I remember Kirsty Allsopp from Location, Location, Location saying saving for a deposit to buy a house has NEVER been easy…it is a discipline and will involve elements of sacrifice and delayed gratification as I mentioned.

      Next, there are also some non-traditional property strategies that enable us to get going in property with less capital…but be warned, they are more like a job or a business in their own right, such as:

      • From £1 to get in – lease options
      • From a month’s rent to get in – rent to rent
      • From giving up your spare bedroom, parking space or garage – renting out space at home
      • From giving up your time – deal sourcing or other landlord / investor services like project management, lettings management and so on

        • Finally, today, another approach is to make what we do have go further once we get started and here are a few ways of doing that:

        • Higher yielding strategies – e.g. HMO, holiday lets, etc.
        • Trading to grow the snowball – buy and sell to make our profit and plough it back into the next deal before we start looking to hold assets
        • Value-adding strategies releasing equity to re-invest – the buy-refurbish-refinance model is a good example of this…buy a property, add some value and then release some of that extra value by refinancing and going again
        • Buddying up – work in partnership with others to make our pot stretch further, but keep in mind the returns also need to be shared too!
        • Joint ventures – a variation on buddying up but only where we borrow the funds from a JV finance partner and repay them a fixed rate or profit share rather than say a longer-term partnership type of arrangement

          • As I reflect on my own situation, I sat stuck for 4 years wanting to get going again in property but I didn’t have the funds available to do so. Then, I realised that I could work with others and adopt a value-adding strategy to get started sooner.

          So, with just £10k of my own money from a bonus at work, combined with £50k from a JV partner, a £50k bridging loan along with a very rare £25k contractor loan to fund some of the works…I was able to get going on a refurb and upgrade project with just my £10k or around 7% of the total funds required, therefore. Then, I was able to refinance at the increased valuation to release the funds to repay everybody and then go again.

          This was not easy and in fact I left my £10k invested in that property, so I still had to start with the funding process all over again BUT if I had bought that same property ready-made with a BTL mortgage I would have needed around £50k of my own cash to do that…and I simply didn’t have it at the time. I could have also sold the property and ploughed the proceeds, including what was effectively my equity deposit into my next deal…and in hindsight possibly should have done too!

          It was, however, the start of my property journey in earnest and I have made great strides since that deal I am happy to say. So, finding a way to get started sooner rather than later is the key takeaway here. Look for a way to get going sooner rather than later, after all as Warren Buffett says, it is time in the market, not timing the market that counts!

          As an aside, if you want to find great ROI / return property projects without leaving home, then check out our Deal Tips Service

          Before I go, and as a reminder, I have previously recorded something of a mini-series on this subject if you want to know what your strategy options are based on a given starting capital fund…so make sure you check those out, I will drop a couple of links to these into the show notes.

          Ok, so that’s me for this week. Remember that you can email me [email protected] if you want to talk about anything from today’s show or more generally in property investing, the show notes will be over at the website www.thepropertyvoice.net

          But for now, all I want to say is thank you very much for listening once again this week and until next time on The Property Voice Podcast…it’s ciao-ciao.

          The post Soundbite: How much capital do I need to start? appeared first on The Property Voice.

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          The Property VoiceBy Richard W J Brown from www.thepropertyvoice.net