What should I do with £10k?
How to start out in property from a modest starting point
This exact question was recently asked on one of the many property Facebook groups. At first it seems like a simple question. But, as with many questions, it is simple until one tries to answer it!
As is often the case on Facebook, many of the answers were flippant or not thought through. The more sensible answers fell into one of three categories. Plus, there were a few unhelpful contributions. These mostly suggested that a person who cannot work it out, shouldn't be investing in property. We don't agree with this view. Property makes a great investment and, with a little help, is accessible to everyone.
When considering what to do with £10k we first need to look at what we need to buy a house. The typical cost of a deposit and purchase costs is going to be around £35k. Well above the £10k available. For a beginner we can discount advanced options such as rent-to-rent or a lease option. So let's look at the choices.
The first group of answers offered on Facebook suggested working and saving hard. The idea was to continue to save from earned income. This is good general advice. Yet, it would take a long time to save enough to buy a house.
The next set of answers was similar to saving. Only this time the suggestion was to invest the money and grow it through interest payments. Again, generally good advice. But again it would take a very long time to generate enough capital to buy a house. Even at a good rate of return, it would take several years.
A further set of suggestions implored the questioner to buy property education. There are a small number of companies offering property courses. These range from a few thousands of pounds to hundreds of thousands. Whilst we are big believers in gaining knowledge, we are not convinced by some of the formal courses. This route does work for a small number of people. Those people seem to be quite evangelical about the course they have completed. Yet, for most people, property education seems more speculative.
Investing to grow capital is good advice. Gaining knowledge always pays off. But both answers are lacking. One takes too much time and the other uses the capital that made the question possible.
The question of what to do with £10k deserves much thought. So we gave it a lot of thought.
If we were starting again in property and had £10k to invest, we would invest it. We would entrust it to a property company with a proven track record. Run by people with whom our ethics and world view align. But we wouldn't only invest the money. As well as getting a financial return, we would want to learn from the people using our money. In short, we would get practical knowledge whilst generating income through investment.
This option sounds too good to be true. So let's consider it from the other viewpoint. That of the people receiving the investment. Their business requires investment so the only extra is the training they provide. Like an apprenticeship, the student undertakes work as part of their training so adds to the arrangement. Plus, many capable property people are only too willing to share with eager students. It's not too good to be true, it is a true win-win for everyone.
But a word of warning. Like so many things in life, this kind of partnership depends on relationships. Make sure that everyone involved has aligned ethics, morals and work commitment. In short that everyone will contribute their share.
What to do with £10k might not be an easy question to answer. But it does have an answer. It has an answer that really does help with starting on the road of property investment.