Investing in property with little money: what works and what's hot air

Property has a reputation for being a rich man's game. You need a lot of capital, an approved mortgage and, even then, a 20% deposit plus costs. If you have less than €40,000 saved, don't even try. That's what common sense says. And common sense, in this case, isn't entirely right.

What does work with limited capital

1. Bank-owned flats with 100% financing

We've mentioned it before, but it's worth repeating: when you buy a bank-owned asset directly from the bank through its servicer (the company that manages and sells the bank's properties), the bank has a huge incentive to finance 100% of it. Keeping the flat on its balance sheet costs it money every month. Lending you the money so that you take it off its hands earns it interest and cleans up its balance sheet in one go. The practical result: you can get into a property with just the purchase and deed costs (8-12% of the price) plus some renovation.

2. Court auctions with a bridging loan

Auctions require you to have the money within twenty days of the close. If you don't have it, some investors and private lenders offer bridging loans specifically for property auctions, with high interest but short terms. If the auction discount is big enough, the cost of the bridging loan is absorbed by the margin.

3. Co-investing with another investor

One puts in the capital, the other puts in the time and the management. It's a model as old as the property market itself. The key is to document it properly in a contract and to be absolutely clear from the outset about how profits, losses and responsibilities are shared.

4. Buying in small or medium-sized towns

In many medium-sized provincial capitals (Cuenca, Zamora, Jaén, Palencia) there are perfectly habitable flats for €30,000-50,000. They aren't glamorous investment portfolios, but the rental yield can exceed 8% net. And that, with little initial capital, is a return that's hard to match with any other asset.

What's just hot air

• "Property investment with no capital" courses: The person selling the course always wins. The person buying it, much less often.
• The "foolproof system" for holiday lets: Tourist letting is increasingly tightly regulated in the cities where it's profitable. Don't base your numbers on Airbnb yields from three years ago.
• Co-investment companies with no clear legal structure: A WhatsApp message and a handshake are not a contract. Without a legal structure, any dispute will cost you more than the profit you were expecting.

The honest starting point

With €15,000-20,000 you can get into the bank-owned property market in medium-sized cities, especially if you get a bank-owned flat with 100% financing of the price. With €30,000-40,000 you have access to a much wider range of assets. Below €15,000, investing directly in property is difficult, but co-investment or a stake in property funds are options.