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There are so many niche strategies open to you when it comes to property investing, here we’ll cover some of the more popular niches. This list isn’t exhaustive as there are probably as many different types of property strategy as there are property! But here we’ll look at some of the more common and relevant niche markets that you can still make a return on.
Caravan Parks or Static Caravans
The idea here is that you can start as big or as small as you like. You could buy a patch of land (in the right area obviously) and invite people to park their caravans or to camp there. As with anything there are rules and regulations that you need to be aware of, but these aren’t that onerous when it comes to a caravan and camping ground. You can build a shower block and maybe a shop that you can invite a franchise into and before you know it you have some regular income from your patch of land.
If you don’t want to buy land, you could start small by just buying one or a few static caravans in an existing park and renting them out throughout the year. If you do it right there is money to be made, but there are going to be voids throughout the year and you still need to furnish and maintain the caravan. Many caravan and camping parks shut down in the winter months, so this isn’t as straightforward a strategy as it first sounds.
REITs or Property Crowdfunding
These investments have been growing in popularity in the UK. Both are similar. REITs tend to work on a larger and more formal basis than crowdfunding but the way each works and the pros and cons of each one are virtually the same. The strategy is that you should get a stable and passive income stream over time and that your capital will also grow.
Whichever platform you are investing in will identify a property that is suitable for investment. Investors then put money into the property either via the crowdfunding platform or via a REIT until it is 100% funded. The platform then buys the property usually via an SPV (Special Purpose Vehicle) or through a company set up specifically to manage the property. You then get a share in the property proportional to the amount you have invested. The platform then finds a tenant and manages the property and tenant day to day. Any profit made is distributed to the shareholders via a dividend.
This is one of the more hands-off approaches to property investing, but you don’t get anywhere near the same return as you would if you were the sole investor or if you were in a joint venture. You can buy shares in a REIT through a stock account, or you can invest in crowdfunding directly through a dedicated platform. They often pay high dividends and are worth considering if you want to invest in property but only have a small amount of capital or you don’t want to outright own a property.
While this is a passive investment, you still have to pay taxes on your profits and if the trust isn’t carefully managed you stand to lose your initial capital. As with anything you should do your due diligence before going all in on this type of investment.
Investing in Land
One of the more traditional investments, land is a versatile way to make money, especially in areas where it is in short supply or where it is about to become in demand.
Land can be improved to add and increase its value, you can acquire planning permission to go with it or build property on the land. It can be leased or rented out to create cash flow and can be subdivided and sold for profit. Some investors will buy land where new motorways or developments are planned in the hope that it will increase in value when it needs to be sold to these developers.
It is one of those investments that is as hands on or off as you want it to be and you tend to get out of it what you’re willing to put in.
The key to investing in land is buying in the right place and doing what you can to increase its value. The biggest pro of buying land is that there are a lot of options open to you when it comes to increasing the value.
Rent to Rent
This is often used in conjunction with an HMO strategy, but it doesn’t have to be. As the name suggests it involves renting a property from a landlord and then sub-letting it either as an HMO or to a single tenant for a higher price and then pocketing the difference.
Renting a property room by room tends to net a higher yield than renting the property as a whole, which is why it is often used in conjunction with an HMO strategy.
The up-front costs of this kind of strategy tend to be lower, so it’s cheaper to get started, however, the margins are small so it can be difficult to make money. To make this strategy successful you’ll have to be hands-on in managing the tenants and the property maintenance, usually the margins will be too small to take on a managing agent. One of the cons is that there’s no long-term capital growth.
It is difficult to find landlords who are OK with this kind of arrangement especially if the landlord has a mortgage as most lenders explicitly prohibit sub-letting. Insurers are also very wary of any kind of sub-letting arrangement, so it can be difficult to get started from this perspective.
This is one of the higher risk strategies for very little in the way of gain, if you’ve got a good landlord who agrees to this though and you’ve found the right opportunity it can potentially be lucrative.
So those are some key niche property investment strategies. These are by no means an exhaustive list, but they should at least be food for thought and a good starting point if you’re considering a change of strategy this year.
