How to make £50k out of a £100k Buy To Let property

For an investor looking to make money in the property market there are multiple ways to make a profit, why not combine them all?  in this example we are using round numbers but the process can apply to any deal of any size.

Click or tap the image below to blow it up and read the steps.

1. The first thing to do is search, search and search again.  There are diamonds out there, sometimes they're overlooked by others, sometimes they're snapped up very quickly.  We have a 21 point property assessment plan which guides us to the best properties available so we can be laser focused on getting the most out of the best deals, you can view and download it here for free 

2. The next item on the list is to secure the property for at least 15% below market value (normally a lot more).  This is so that you are covered should the property market dip, there is financial space to refurbish the property and you are able to add value to it.  If you've followed the 21 step property assessment plan from point 1 you should be able to achieve this easily.

3. Now it's time to refurbish the property throughout.  There are specific things that you can do to add value to a property and other things that might not be worth doing if you want to get a return.  It's important here that you have a good team that delivers on budget and on time, if you are in a lower value area then take into account the fact that you might not be able to add too much value to the property when you are sourcing it.  

4. Take out a 75% Buy To Let interest only mortgage at a rate of 3% or less.  What does that mean?  It means that if the property has a full market value after refurbishment of £100,000 you can take £75,000 out as a mortgage against it leaving you with 25% and £25,000 in equity in the property, at 3% this will cost you £187.50/month.  At the time of writing there are sub 2% Buy To Let mortgages available on the open market in the U.K.

5. Rent out the property at open market rates, you get a double whammy from a high level refurbishment, not only to you raise the value of the property but you also should get top market rental rates and clear a profit of £300 - £400 per month.

6. Tempted to sell?  You can and make some instant cash, there are always multiple exits to our strategies.  However, in this case, if you followed our plan you would hold onto the property at first for a period of 6 - 36 months until the rent has paid off any money you had left in after the remortgage from step 4.  At this point you have none of your own money left in the property and are making £300 - £400 per month.

7. Over 10 years, if you have selected a property in a good area (see the 21 page checklist here) you should see the value of your property increase by half (properties double every 20 years or so).  If we are very conservative and half that to 25% you would get capital appreciation of £25,000 over the 10 years plus, even if it took the full 3 years to pay off your initial investment £29,400 in rent profits.

Congratulations, you've just made £55,000 with an asset that has none of your own money left in it and...

  • That's without factoring in 2% - 3% annual rent rises.
  • The fact that you could borrow against your equity in the asset and do it again
  • and again
  • and again

If you leveraged the last property to finance the next and did one every year you would be on £3,000 - £4,000 per month positive net cash flow and be up half a million over each one across it's 10 year cycle and still have your original pot of cash.

The best thing about this is the size of the original pot of gold... to achieve this you'd need to secure the original property for £72,000 with a £10,000 refurbishment cost.  With a 25% Buy to let mortgage you could start with £18,000 of your own money to buy the property and £28,000 in total.

Many people could use the equity in the house they live in or just not buy a new car this year to start this process off and be making strong passive incomes.

if you liked this article then please share it and take a look at our 21 point property assessment plan and our "why invest in property" article byclicking here.

About the Author Martin Howard

Hi, I'm Martin Howard and I authored this article. I lead up the Key Properties group, we are a sourcing, development, estate and letting agents that operates mostly in South Wales. We typically over achieve on our projects and deliver great returns to our investors. Email me: martin@keypropertiesuk.co.uk if you want to chat or WhatsApp, call or message 07851 873995. Thank you for reading 😀😀

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