Grant Erskine: If you Had to Choose One Investment Strategy, Which Would it Be?
Which property investment strategy is best? Today, Grant Erskine argues that the simplest and most effective business model is still the buy-and-flip. For yields, however, nothing beats an HMO but be careful not to overstretch yourself. HMOs require management and upkeep and can be too much for one person to manage.
The 3 Ps
Amy: If you had to choose one investment strategy, which one would you choose?
Grant: We talk about the three Ps. The right property, the right person, the right place. And more importantly, the right property, the right price and the right place.
And this is where a lot of people fall down. They don't get the three Ps right - Property, Price and Place. So, they buy the right property at the wrong price in the right place. If you don't get all three of the Ps right, it's not going to work.
Buy And Flip
Grant: Personally, I like buy-and-flip. It's my own personal view but I always have liked it.
It's a really good opportunity to buy a property, add value and sell that property. It's quite an easy business model to look at because you've got your money in and your money out. You know your profit margin.
Grant: HMOs are massively popular and I can see why because there's nothing else on the market that provides that yield.
The one thing I say about HMOs is that if you are going to do them, do them right. We get a lot of people who come to us, who have had a few buy-to-lets and want to do HMOs.
And they try to manage their HMOs themselves and manage the tenants. My advice is that you should consider yourself as an investor. You shouldn't try and be a handy-man, a landlord and a property manager. You should hire other people and write the costs into your numbers.
And yield is important. You've really got to understand your numbers. And all too often I meet people who are only making money on their fifth and sixth bedroom on a six-bed HMO. This is okay if they're let but if they're not let, then you're not making any money.
Grant: So, understanding your business is absolutely key.
I was just talking with Chris before we started this. Personally, I think the buy-and-flip market is best between the 150 and the 250k region.
If you can get a property at 150 and spend 30 and maybe sell at 240, there's a lot of meat in that.
But I also meet people who try and buy at 60, spend 10 and sell at 85. So, there's not a huge amount of meat in that. There's not a lot of wriggle room in it. And there's a good chance that it's the same amount of work.
So, up-your-game. If you can afford to stretch yourself and do the big ones then that's better. Do 2 or 3 good ones in a year, as opposed to hustling and trying to do 2 or 3 bad ones in a year.
Because that's the difference between making 90k and making 30k.