What Sort Of Deals Can Be Done In Property In Order to Make Money?

Hi Everyone,

I hope your week is going well so far.

I have prepared a list of all the main ways in which you can make money from property, which is by no means all of them but will serve to illustrate how much scope there is to make money from property in many different ways.

These sorts of property deals can be carried out anywhere in the world, although the terminology may differ from country to country, I use the Uk terminology.

Buy Or Sell A Property For Cash: This is perhaps the simplest type of property transaction, where a buyer with sufficient resources buys from a willing seller for an agreed amount of money.

There are various ways in which you can do this, for example, you could decide to sell your property or buy it at an auction. Even auctions these days may be of different types. Traditionally an auction was held at a physical location and people would attend in person and if interested would bid at the auction in order to buy a particular property.

Auction purchases are usually quite strict that you must immediately pay 10% of the successful bid (your bid). Completion of the transaction is normally within 28 calendar days, with the risk that if you do not meet that timescale, you will forfeit your 10% deposit that you already paid.

Normally in the UK, if everything goes smoothly a property purchase or sale would take at least 2 months, and sometimes 3-4 months or even longer, since the process is quite complex and involves legal searches by the solicitor or lawyer/conveyancer who is dealing with the transaction, the length of time depending upon response from other legal entities such as mortgage funders, and local authorities.

So, you can see that if instead of the normal period of several months, you only have 28 calendar days, you must really push and shortcut the process, perhaps at more risk to yourself.

28 calendar days is only 20 working days! Maybe in the month there could be 1 or more bank holidays, so these need to be deducted from the available working time, so you can imagine that over Christmas and New Year it can be particularly difficult to complete an auction purchase quickly, especially since many solicitors go skiiing between Christmas and New Year!

There are also online auctions these days, which follow the same principles as for in person traditional auctions.

Apart from auctions, in person and online, and straightforwards sales and or purchases of properties, there are many other variations which can be described as more creative in many respects.

You may buy a property with a mortgage or a loan or bridging finance so as to secure it, improve the value then refinance it.

Commercial to Residential conversions using Permitted Development Rights.

Provided the commercial buildings conform to certain criteria, such as they were built between 1948 and 2018, and are not Listed buildings (meaning they have protected status), and they are not situated in a conservation area, or an area of Outstanding Natural Beauty of in the Green Belt (protected countryside), then you have an automatic right to make the conversion from commercial to residential using one of the Permitted Development use classes.

There are 2 popular PD rights, which are Class G - giving the right to add a ground floor flat at the rear of an existing shop premise. The second is class MA (Mercantile to Abode - which shows that there are still some bureaucrats who speak in 18th Century English, where else would you dream up a complex description for something simple), which allows you to make 2 flats above an existing shop premise.

The Permitted Development Rights continue to change so you have to be alert so as not to be caught out by these changes, and try to carry out something which was allowed, but is no longer allowed:-)

Commercial to Residential conversions using Planning Permission. This applies where you do not have Permitted Development Rights and you must apply using the normal Planning Submission and Approval (or Rejection) process, which can be very lengthy and with uncertain outcomes.

Planning Permission can also allow you to change the use class of land, which may have been zoned for commercial or industrial use onto residential use, provided it is not at severe risk of flooding.

New build developments usually require a detailed planning permission to be granted before construction is allowed to start.

There are other more creative ways of buying and selling property, for example:

An Assisted Sale: Here you don´t actually buy the property, but you pre-agree with an owner that you will refurbish their property and sell it at a higher price, out of which you recoup your construction refurbishment and finance costs, and your profit. So the owner will also benefit from the increased value that you create.

Alternatively, you could take out an option to purchase the property at a future time, which means that the owner is obliged to sell it to you for the period of the option, but you are not obliged to buy the property (although you have the right to do so, for the option period). This works well if you dont have the money to purchase a property now, but you would like to control it and use it for the option period.

Another option could be that you have a tenant buyer, who cant afford to buy a property yet, but will do in the future, similar to the option we just described.

You can agree to purchase a portfolio, which means multiple propeties under one transaction, or it could be phased over a number of years to give the vendor opportunities to offset taxes that may become due.

In addition to the above strategies you could combine strategies if you want to get really creative. I wont bother to attempt to describe all the different possible formulae, but you get the point. You are only limited by your own imagination and creativity as regards what you can do with property and how you can earn money from it.

Have a great week everyone, wherever you are in the world!

Cheers

Alan