What Investment Strategy should I choose?

John Paul

With so many investment strategies out there how do I know which one is the best, should I go for Lease options, HMOs, LHA properties, SARB, flipping properties, RMDs?

You will have undoubtedly been to all the seminars, spoken to all the experts selling their unique workshops, spoken to countless fellow investors and some of you will still be confused as to which way to invest.

I’m going to give you my opinions as to the pros and cons regarding the most common investments strategies that are being promoted as the next best thing. Some you will agree with, some you won’t, the point is to at least have an opinion about them which will help you choose investment strategy.

I want to get you out of being a seminar junkie!!!! I don’t want you to be one of those people that spend literally tens of thousand of pounds going on courses, learning about everything to do with property and yet have never bought a house. This year I’ve made a real effort of networking around the country (doing at least one a week) and it has amazed me as to the amount of investors who fall into this category. Theory is great but without putting it into practice its useless and your property investor dream is over before it has began.

I must stress that I have used each strategy below and have found the niche that I feel most comfortable with but you do not have to stick to one strategy, there is no hard and fast rule that says “I can’t use lease options because I buy HMO’s” each strategy has its good AND bad points and where you are at that time of your life will also affect you.

Lease Options

Pros – Great if you have little money and want to secure a property

Cons – Not every vendor understands them and many sales fall through because of this

You never really own the property

HMO’s

Pros – Great cash flow if managed right

Cons – Can be a huge capital outlay

Sale and Rent Backs

Pros – Great discounts

Cons – Legislative nightmare

LHA

Pros – Great cash flow and yields

Cons – Can be very difficult if not managed right

RMD

Pros – Very little work for investor to do

Cons – Too many poor sourcers and finders ripping off investors

Flipping properties

Pros – Great potential profits in short space of time

Cons – Mortgage problems, Hard to finance, 6 month rule, CGT

You can use each and any strategy you wish, I’ve chronicled my investment life cycle into three stages and have just started my fourth

2004 - 2006

When I started in property investment 5 ½ years ago I wanted 3 bedroom houses in the middle of my town because I thought they would rent out easy, I’d have no trouble, and capital appreciation would be great. I was working another 2 jobs, my daughter had just been born, so I didn’t want the hassle that I thought would come with different types of properties.

2006-2008

Then when I packed in my job and became a “professional investor” I needed cash flow, so using Mortgage Express I bought very cheap, high yielding LHA style properties in less desirable parts of the town and local villages. As I was hands on I could control the properties better. The results were astounding. I was financially free within a year

2008-2009

When I decided to set up my other business’s I didn’t have to time to look after my properties myself, so my staff looked after them (better than I ever did) but it allowed me to sit back and look at what I wanted from my portfolio. Although there is nothing wrong with the strategy I had used, I wanted to diversify and try something else. So I tried lease options and HMO’s. They both have their good and bad points, HMO’s are great cash producers but capital intensive whilst lease options are very inexpensive but the rewards are not as great.

2009-Present

I’ve bought an old building and have turned it into a mini business centre for our business and for other start up business’s. It has certainly been a learning curve, but the advantage of this commercial venture is that once we have let out the remaining rooms (75% pre let) we will be not only be rent free but also making profit. The remortgage or exit strategy of commercial is easier than residential also, with lenders not being as controlling or apprehensive about lending.

So what’s the answer?

There is no defined answer, that’s the point. No one strategy is better than the others. We will all come across investors who have had good and bad experiences with some or all of the strategies. The way forward is to actually pick on that suits your needs and circumstances, but actually go for it. Don’t be a spectator, get in the game.

If you would like to ask John a question click here

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