A great way to make money and get yourself onto the property ladder is by buying, fix, and sell properties. Also known as a renovation or development projects, this can make you a lot of money when the value is added to the property.
However, it can be hard to get into the business as a lot of investment is required to start.
How Can It Make You Money?
Firstly, the property is needed to fix and sell on, but you’re then set for the project and making a profit once you have this.
It makes you money by adding value to the property or buying a rundown property to fix up, so it sells for more than what you paid for it. This money can then be used to purchase another property and carry out another project, to make even more money.
Obviously, with this type of thing, a lot of money is required in the first place, but you can keep making money from it once you’re in the chain.
You will need builders, developers, or renovators to renovate if you cannot do this yourself, which is another cost to consider within the project.
How To Start Off
It can be hard to start with buying a property, fixing it, and selling it as it costs a lot of money to purchase the property in the first place. As this is something that a business usually does, unless you have deep pockets, the option is to seek finance.
It is extremely difficult to get a mortgage for this purpose, so other finance solutions are needed.
A better option would be to seek short-term finance such as a bridging loan or development finance, borrow money from friends and family or re-mortgage a property you own to purchase the property.
Once the property is bought, the renovation and development project can begin. Again, this will require money to do. Therefore a financial solution such as a bridging loan or development finance may be the best option for this.
When the project is complete, it can then go up for sale and sell for more than the purchase price, making a decent profit. If something like a bridging loan or development finance was used, this could be immediately paid back after the sale.
How To Source The Properties
When it comes to buying a property, you need to find somewhere to do this, and preferably to find properties under market value.
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- Zoopla – An online resource
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- Rightmove – An online resource
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- Auctions – Great bargains are available at property auctions
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- Estate agents – They can help you find some bargains
With all of these sources, there is such a wide variety of different properties ranging from prices, sizes, and location. It’s good to have a browse online at these websites to find the right property.
Research the area and find out what the market value is. The goal should be to seek cheap properties that require some renovation. You will need to calculate the finance costs, renovation work, and look to make a profit.
Financial Options To Help Out
As previously mentioned, there are financing options to help you out and start a big project like purchasing a property to sell it. These can be available to both individuals and businesses, but most of the time, it will be for some business use with a property project.
Development Finance
Development finance mainly targets developers and builders, where a large loan is borrowed for a property development project.
Development finance is used purely for property development purposes, meaning a large amount of money can be borrowed.
The business or individual will need to prove their experience in the industry, so it is not the best option when starting. They must also have evidence of purchasing the property, development plans, and how the money will be used.
With this type of finance, the lender may want to look at the property and get an idea of how much it will be worth once the project is complete. It will determine how much they are willing to lend and what the payment terms will be.
Development finance is a great option for experienced developers that needs a short-term loan that will lend a large amount of money. Once the project is completed, the money from the house’s sale can then be used to pay the loan back. It’s quick, simple, short-term, and directed at property development projects.
Bridging Loans
A bridging loan is also a short-term loan, but available to both businesses and individuals. Money can be borrowed to purchase and fix a property to sell. This option is a bit more flexible as it is open to more of a variety of people, but you may not be able to borrow as much money as you would with development finance.
With a bridging loan, the lender may assess what assets can be used as security and then discuss what the money will be used for, how much is needed, and the exit strategy.
If the loan is being used to purchase, renovate, and then sell a house, this is your exit strategy. The money from the property’s sale after the project can be used to pay the loan back straight away.
A bridging loan is a great financial option for buying, fixing, and selling a property as a short-term loan is available to help you with the project and then make money at the end of it. It’s also very quick, easy, and simple to get one, once you find the right lender.
Final Thoughts
It is not an easy business to get into due to the finance required, but it can be a very lucrative business if you can arrange the finance to start. And the sky is the limit on how far you can go and make.
