Rent a room, the whole house or renovate to sell at a profit? There are several strategies to look at when it comes to investing in property.

In very simplistic terms, when we’re looking at residential property investment there are two property investment strategies:

Buy a property, improve it, sell it for more than you bought it for

This strategy is pretty simple to understand. The main thing you need to consider is whether you’ve got the finances to not only renovate the property, but you can afford for the property not to be earning money in the process.

You’ve also got to have an eye for a property which will increase in sufficient value to cover the financial cost and the time spent in doing so.

Buy a property, rent it out, earn an income

Buying a property to rent needs a little bit more thought as there are a few other strategies to consider too…..

With a rental property you can make your money in two ways:

1. From a rental income
2. From the growth in capital value when you come to sell it

Either way, you’re usually looking at it putting money in your pocket (or putting it into negative equity for tax deductions purposes) on an ongoing basis, and hopefully making a tidy profit after a few years.

So how do you get the property to work for you to give you a regular income? Again there are choices. The key is getting the right strategy for what the property lends itself to, and working out how much time you want to spend in managing it. In very simplistic terms, these are:

• Renting out the property as a whole

Whether it is a one bedroomed apartment or a five bedroomed house, the tenant (or sometimes two or more tenants) signs a lease for the whole property. In most instances, the property is rented out unfurnished and the tenant(s) are responsible for most of the utilities.

• Renting individual rooms

As each room is rented out on an individual basis, this strategy only tends to work for larger properties. While there is the potential for higher rental income, the outlay for the landlord can be more both in terms of a financial cost and in time spent managing the property.

Usually the individual rooms and common areas are furnished, meaning there is the potential for more wear and tear. In addition, as there are more tenants, the chances are, the property may need maintenance down the line.

There is often a higher turnover of tenants, so to avoid confusion and disputes, utility bills are usually included in the price of the rental – both of which add to the time spent managing the property. In addition, there are other regulations to consider when renting out individual rooms. Landlords insurance may also be more expensive.

• Student lets

Although this type of rental could potentially fall into the category above, there are some differences which warrant it falling into its own category.

Once again, the property has to lend itself to this type of rental not just in terms of size, but it also needs to be located in proximity to the university or educational establishment. There are still the financial costs of furnishing the property, and wear and tear aspects to consider, but there are some plus points. You can put the property on the list of preferred accommodations with the educational establishment and the chances are, you’ll have a constant stream of tenants.

Depending on the property, we tend to recommend renting out the property as a whole because in our mind the pro’s outweigh the cons. Quite simply, renting a property as a whole means one contract, cheaper landlord insurance, less initial outlay, less maintenance costs, lower vacancy rates and ultimately less stress and hassle.

The most important thing to remember, for most people property investment is generally a long term investment, and the capital gain won’t happen overnight.

If you want more details about these strategies or you have seen a property and want to know what can and can’t work, please do get in touch for some free advice. We’ve got over 40 years of business behind us, so we can definitely give you lots of ideas and points to consider. Give us a call on 02 4956 9777 or pop into our Cardiff office for a chat.

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