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So you own your own home and have got the property bug. How do you make the jump from owning your own place to owning an investment property – such as a buy-to-let unit?

The good news is that it is not especially difficult – if you know what to do and go about things the right way.

Here are the 4 main things to do to move up in the world from owner-occupier to property investor – with a portfolio of at least one property and the potential for many more.

1. Seek advice from a property professional

The first and fundamental step is to find out whether you are doing the right thing by scaling up your property ownership.

The biggie is affordability…can you safely afford to buy? Is it the right time to do so? Might you be putting your home at risk by taking on extra financial commitment?

Do you have enough money or savings in reserve to deal with unexpected events such as loss of job, ill-health or an economic downturn?

Another key consideration is the way you should go about buying – the procedures and steps you should follow – the timescale to work within – the plans you should make.

There is also the matter of the tax implications.

Also fundamental is the way you are going to invest in property. Are you going to go for something fairly simple such as buy-to-let, or are you going to look at something less mainstream such as flipping or buy refurbish and refinance?

To get reliable answers to these and other questions, you should seek advice and assistance from suitably qualified persons.

You will probably want to consult an independent financial adviser or money adviser in any event. In addition, you may benefit from advice and assistance from a solicitor, property coach, accountant or a property investor with practical knowledge and experience you can tap into.


2. Keep your credit score looking good

Chances are you are going to need to borrow in order to buy an investment property.

The better your credit score, the easier you will be able to borrow and the better the mortgage deals you are likely to be offered.

If you have messed up your credit record since buying your home, there are 10 steps to clean up your credit act. Also look at the ways to boost your credit score.

3. Raise the deposit or down payment

Not being able to raise the deposit is a major hurdle which can stop you from buying a property for investment purposes.

When buying an investment property, you are likely to need a deposit of at least 25%, rather than the 10% or less you normally need when buying as an owner occupier. 

You need to have the deposit in place or know how to raise it. An effective way to raise a deposit is to release available equity from your existing property by remortgaging it or taking out a second mortgage. 

If you need to save all or part of the deposit, look at the ways to cut spending – grow deposit and boost income – grow deposit.


4. Identify the right location

An important decision will be deciding the town, area or region where you should buy. You need to select the right location for you. Part of that will be down to your budget – the price range you can afford.

For example if you can only afford a property in the £100,000 to £125,000 range, you need to identify areas where you can find properties in that price band – taking into account your chosen strategy.

You may need to buy outside your local area in a distant part of the country,  which may present challenges as to management, time input or reduced profitability. 

In brief, you will need to find a property which will work for your chosen strategy, and you will need to be flexible when selecting your “goldmine” locations. 

5. Conclusion

Pushing on from being a home-owner to a property owning investor is possible by a number of approaches. Leveraging your home to raise a deposit is one of the easiest and most cost effective routes.

But you should not rush the process. Wait until your home has a very healthy amount of equity before taking out some to buy an investment property – aiming to retain equity of at least 35%.   

Have you ever leveraged your home to buy an investment property?  Was the process trouble-free? Please leave your observations or comments below.

You may also find the following blogs useful:
Buying a property fast (wacky and wicked ways to raise a deposit)
Raising a deposit (14 common ways to bag a deposit with ease)
Mum & dad to the rescue (ways parents/grandparents can help you to buy)
The arrival of rentvesting (an overview of rentvesting – investing while renting)
Buy a property with a property (12 ways to raise a deposit using a property)
Is getting a mortgage easy? (a look at the ins and outs of getting a mortgage)

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Dalton Barrett
Rebel Property Coach

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