Case Study: How 'Controlling' Property Made Us 4x More Profit Than the Landlord!
After graduating from university in the summer of 2016, I wasn't entirely sure what I wanted to do but the one thing I was sure about was that I did not want to get a job.
I figured investing in property would be a good place to start as it would give me the cash flow I needed but the only problem was that I didn’t have the capital to invest in the first place. This is when someone asked me...
Do you want property, or the benefits of property?
I didn't necessarily want four physical walls and a roof, I just wanted the cash flow so I didn't have to get a job. This made me think about different ways in which you can control property and still get the benefits without having to own the property and therefore put down big deposits.
*Disclaimer: the benefits from this strategy is purely cash flow and not longterm equity*
This is what we did.
Below is a picture of an apartment which was available to rent on the open market for £750 per month. We leased the apartment for 3 years at £725 per month.
To lease the apartment we had to put down a deposit (6 weeks rent) and a one month rent in advance. This came to a total of £1763.
We then had to furnish the apartment as our plan was to sublet it as a furnished let on a short-term basis. The furnishings cost us £1500.
Total investment so far: £3,463.00
6 weeks rent the deposit: £1038
1-month rent advance: £725
Letting agency fees: £200
We then started to market the property on websites like Airbnb, Booking.com as well as with insurance and corporate agencies.
One of the corporate agencies had as IT contractor coming over from India for 2 months and needed short-term accommodation. They paid us £85 per night!
This totals £2,550 for the month.
Our costs for the month were the rent (£750), council tax and bills (£250) and a weekly clean of the apartment (£100).
Our net profit from this apartment was £1450.
This particular unit did not have a mortgage on it as it was bought cash. But for argument sake, if it did have a mortgage on it, on a 30-year interest only at 3.5%, the landlord would be paying £394 per month for the mortgage. This means, the landlords' net cash flow from this property would be £356 and this isn’t even taking into account maintenance and voids.
Our net profit was 4x higher than the person who actually owns the property and paid thousands to acquire it.
This strategy has allowed me to continue acquiring more and more properties and benefit from the high cash flow and therefore helping me achieve my goal of not having to get a job!
So if you are thinking about investing in property but lack the capital to start, then think of ways you can control the property and still get the benefit. Common ways include:
Leasing apartments or houses and running them on a short-let basis and therefore charging a markup.
Leasing bigger houses and renting out the individual rooms.
Lease options: more complicated, but this is where you sign an agreement that you will purchase the house in X number of years and until then you have control over the property.
By using these creative options, you can start a property business and reap the rewards even if you lack the finance initially.
If you dont find a way to make money while you sleep, you will work until you die - Warren Buffet