What is a Buy-to-Sell Investment Strategy and why does it matter?
We’ve looked before at the importance of an investment strategy, and covered the most popular buy-to-let strategy in some detail, here.
As we’ve said before, a strategy is essential. And there are only two real strategies that, as an investor, you’ll need to use.
Two fundamental strategies
Either: an investor buys a property and rents it out to create a future income stream
Or: an investor buys a property (possibly off-plan) and aims to sell it at a future date to make a profit off the back of rising house prices.
In this article we’ll consider the second of these: the buy-to-sell strategy.
Buy-to-Sell Investment Strategy
Buying a property to sell is completely different to buy-to-let, aimed more at short-term or mid-term strategies. There’s no worrying about rental income or tenants, you’re just simply looking to sell for as much profit as possible.
The main attraction of buy-to-sell is the amount of money that can be made quickly. You can buy and sell in a matter of months rather than the long-term timeframe that comes with a buy-to-let strategy.
This is also the downside. This type of investment only makes money when you’re working. There’s no passive income, just the money you make on the sale.
The most important things to keep in mind when looking at buy-to-sell are location and budget. You need to ensure that you buy at the right price and keep any refurbishments or maintenance within your budget. Secondly, you need to market your property quickly and effectively. Having a good location for this process is ideal and will help the sale immeasurably.
Choosing buy-to-sell for your investment strategy depends entirely upon your goals. If you’re looking for something short-term and want to generate a lump, it’s perfect. If you’re in for the long-haul, want to build a portfolio or you’re looking for passive income, it’s not for you.
A quick process that’s well suited to short-term goals
No tenants or maintenance to deal with
Less dependent on the long-term health of the property market
No passive income for the future
Complex management and hands-on work
Can result in a loss if done incorrectly
What about buying off-plan property?
This strategy is not strictly Buy-to-Let or Buy-to-Sell (both are viable), it’s simply a different method of initial purchase. Off-Plan Properties are new-build developments that are not ready for tenants, instead bought by investors before completion.
By buying off-plan properties you can often find excellent individual discounts. Additionally, off-plan properties are often seen as good investments because of the capital growth they can experience between planning and completion.
As an investor, you would buy a property unfinished, wait for completion, research the market and decide whether to rent or sell. This offers flexibility in strategy, although it requires a lot of management and due diligence.
As always, growth isn’t guaranteed. Investing in off-plan property is entirely dependent on the market, particularly if you’re hoping for capital growth during the build period. Be sure to research the area and the market conditions before diving in.
Discount on initial purchase
Potential for capital growth during the build period
Flexibility in strategy
Advanced strategy that requires management and due diligence
Cash often necessary for deposit
Whatever strategy you choose, it’s vital to ensure that you do your research, ask advice wherever necessary and keep on top of your goals. If you have a solid investment plan, you’re better equipped to make sound decisions and have a better chance of finding success. As ever, don’t hesitate to reach out to the APW team for further discussion.