How to use property to create an income within two years
Do you have some spare capital which you would like to invest and create an income stream? Are your savings earning minimal income on deposit and losing in real terms when taking into account inflation? There are a number of ways in which you can use the property market to create sustainable long-term income streams.
Setting your targets
If you don’t have targets then how can you hit them? Sit down and think through exactly what you would like to earn after two years and then be honest and assess whether this is feasible. Issues to take into consideration include: –
- Be realistic and err on the side of caution if anything
- Set yourself staged targets
- Decide what you would like to earn after two years and then work your way backwards
- Are you financially secure to be able to invest in the longer term
- Do not take undue risks to hit your target – slow and steady is more sensible
We would all like to create a significant additional income stream in the short to medium term but we have to be realistic and sometimes scale back our expectations.
We all have different skills, we all have different financial situations but there are a number of investment opportunities in the property market. At the end of the day it will come down to whichever ones you feel more comfortable with and whether you have advisers around you to help. Investment opportunities take in all kinds which include:-
- Hands off developments such as hotel rooms, care homes and student accommodation
- Buy to let investments
- Joint venture opportunities allowing you to scale up your exposure
- Releasing equity in your home to expand your property portfolio
- Refurbishing an old property can significantly increase rental income
- Flipping properties, often bought at auction, can prove to be lucrative
- Homes of multiple occupation (HMO) offer very attractive rental yields
As you’ll see from the above list these investment opportunities have very different characteristics thereby ensuring there is something for everybody whether you are hands on, hands off or in a position to refurbish/redevelop existing properties.
Cold hard facts
When looking at creating an income stream from your property assets you will need to look at the cold hard facts. The best way is to break down projects and investment opportunities into micro-considerations:-
- Are you possibly switching long-term capital growth for short-term income
- Are there better opportunities elsewhere perhaps away from your local market
- Do you have the time to be a hands-on investor
- Is your target income stream feasible without undue risk
- Are you diversified or overexposed in one particular area
It is also sensible to take into account potential exit strategies from individual investments as you may wish to liquidate your assets in the event of retirement or any other life changing situation.
Long-term cash flow
As with any investment there will be an initial upfront payment and with refurbishments and redevelopments there may be a period when your asset is non-income producing. You need to weigh up the short term situation against your medium to long term plans to build an income stream. It is also worth noting that when redeveloping properties or redecorating houses there is no need to go over the top with regards to your expenditure. Again, you need to balance this additional investment against the likely timescale and long-term return.