Six steps to cashing in on the credit crunch

Even though the years of booming property market prices are over, it doesn’t mean that property investment is still not a good way of making money.

Yes, it’s true that years ago buy-to-let investors made money easily. All they had to do was buy a property, rent it out and then sell it a year later at a great profit.

But although these days are over, with property prices dropping 30% many would-be investors now believe it’s a great time to get back into property.

For those believing that property is at the bottom of the market and the only way is up, there are plenty of options to how you can make money from property:

1. Rent out a room

This is the easiest way to make money from property, as there are fewer legal formalities you must follow than if you were to rent out a property to tenants. But it’s vital that you get your lodger to sign a Lodger Agreement. Plus, under the Inland Revenue’s ‘Rent a Room’ scheme, you can earn up to £4,250 per year tax free.

Find out more on how to get a lodger and earn £4,250 tax free.

2. Buy-to-let

Many buy-to-let investors got caught out by buying property in city centres, which were saturated with flats to rent. Due to oversupply, rents are low. But if you think that buy-to-let is dead, think again, as the student market is always buoyant. Student accommodation is constantly in demand and if you rent out to students from overseas, they will rent for the whole year and not just for term time. It’s also a great way of getting rent from lots of tenants, by converting the living room of a house into accommodation.

3. Get a serviced apartment

The serviced apartments market is experiencing rapid growth in the current climate and the rental yields are high for property investors. In the recession more and more business visitors like the flexibility of staying as a tenant in what feels like their own home. Plus, with the saving of up to 25%, staying in a serviced apartment is a much cheaper option for them than a hotel. Most buy-to-let landlords can convert their existing properties, especially new builds, into serviced apartments, with minimal investment. And can expect to achieve a 300% increase in rent and rental yields in excess of 20%, with minimal outlay.

Landlords: Find out how to make money from serviced apartments.

4.  Buy a property at auction

Renovating a property you purchased at a discount price can be a great way of making money. Property prices at auction are often 35 per cent below estate agents' asking prices. Try to buy a property that you can extend as this is the key to adding value. But as the property market is slow at present, you will probably have to rent it out for two to five years after renovation to get the highest return on point of sale.

Find out more on picking up property bargains at auction.

5. Rent out your holiday cottage

Lots of people are now deciding to holiday in the UK due to the recession, so British holiday lets are booming. Although some areas in the UK (e.g. Devon, Cornwall and the Cotswolds) are only popular in the summer, lettings in the Lake and Peak District are busy all year round due to winter walking. Four to eight-bedroom houses are the most popular. To protect your property, though, it’s vital that you get your visitors to sign a Holiday Letting Agreement.

6. Buy a repossessed property

If you're finding it difficult to get onto the property ladder or are expecting property prices to rise again over the next few years, then you can take advantage of the credit crunch by purchasing a repossessed property. More and more repossessed properties are coming onto the market as homeowners are getting further into debt. Although you may not want to take advantage of other people’s misfortunes, buying repossessed property does make commercial sense as you can pick up a bargain for 10 to 15 per cent below market value.

Find out more on how to pick up a bargain repossessed property.

Published on: June 2, 2008

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