How do I find a property I can make money on?

Property investor Henry Davis has more than 30 years’ experience in property development and delivers the NRLA’s suite of property investment courses. Here he shares his advice on sourcing the right deal for you.

One of the most frequent questions I am asked on my courses, is how do I find properties that I can make money on and what should I be looking for?

Sourcing the right deal is the Holy Grail when it comes to property investment.

Unless you are lucky enough to have unlimited resources, it is vital you make every deal count if you want to build a lasting and sustainable business model.

Creating value and equity in every deal is the only way you will ensure you have a ready supply of deposit money for your next investment.

So, what is the secret when it comes to making the numbers add up?

In my experience, the most effective strategy when it comes to growing your portfolio is BRRR – Buy, Refurbish, Refinance, then Repeat.

In this way you are ‘recycling’ the same funds over again when you remortgage or sell the property.

Which properties to choose?

Of course, key to the success of this strategy is selecting the right deal in the first place, and I do this by targeting derelict properties to redevelop. 

This may seem counterintuitive. Why chose a building that is going to take a significant amount of work – and therefore money – to make it liveable?

Quite simply because this will give you the freedom to add value by fully reconfiguring the site to maximise space, creating a desirable property that will dramatically increase in valuation and – something that will become increasingly important in the coming years – one with a high EPC rating.

My personal approach, as a developer, has always been to source the deal in this way, add value, then sell the refurbished property to investors.

This way I am extracting all the profit – or equity – from the deal.

The investor who purchases the redeveloped property does so in the hope that rents and house prices will increase to grow their investment.

Back to brick

The most lucrative deals for me are often a commercial-to-residential deals where I take properties “back-to-brick” and then reconfigure room sizes and put in additional living space in the attic.

Commercial-to-residential conversions are ideal, as commercial property will always be cheaper to buy per square metre and checking out EIG Auctions or Property Link by Estates Gazette is a great place to start looking.

That said, a terraced house needing a ‘back-to-brick’ would also be perfect for a starter single-let.

If you were to take on a larger terraced house, you could potentially convert it into a six-bedroom house in multiple occupation (HMO) under permitted development rights.

And, even better, if you could find one with a large footprint [that wouldn’t require an extension to meet the minimum room size for a kitchen] your lender will be able to give you a commercial valuation.

 When it comes to my own investments, old pubs or offices are my preferred buildings, as they have decent amenity spaces and are generally easier to get planning permission for, assuming they have been closed for a few years, meaning they are less likely to be subject to the Assets Community Value Protection under planning law.

A derelict shop with residential space above is also a good bet. Keeping the shop, but adding a new staircase at the front, while slightly reducing the retail floorspace allows you to create HMOs or flats in the upper floors, again, increasing the resale value.

Creating value and equity in your investments is the only way to create a sustainable business model that will allow you to continue to grow. Without that it’s only a matter of time before those deposit funds start to run dry.

This article was first published in NRLA members magazine, Property

• Henry is the author of The Truth About Property and delivers courses The Key to Property Investment and Property Refurbishment for the NRLA. The latter comes with a free project management spreadsheet offering detailed step-by-step guidance on how to manage and control projects. For more information and to book visit nrla.org.uk/training