Property Insight – Posted by Graham Turrell on Wed, Feb 11, 2015 @ 09:05 AM
For many property investors that have no desire to be a full-time landlord, the holy grail of successful property investment is simplicity.
Today we look at why received wisdom about property investment shouldn’t always be relied on for something this important to your future wealth and health…
Typical would-be property investors often have this thought process:
Thought 1. The would-be property investor becomes aware of potential in the UK residential property market (also known as Buy To Let). This could be via the media, and popular property TV programmes.
Thought 2. Interest in this then develops as a way to build a nest-egg and generate better income from their savings.
Thought 3. Search the internet for “armchair” property deals, or spend £1000’s on property courses.
Thought 4. Connect with a few online property agents that focus on selling discounted UK residential properties with the promise of high yields and some capital growth.
Thought 5. Mull it over with friends, family, some of whom may have experience.
Thought 6. Decide to dig a little deeper. Talk to local estate agents and engage with a few mailing lists from Below Market Value property providers around the country. Visit local property networking events to try to build a body of knowledge to take the first step. Maybe part with a few £1000’s for education from a chosen property “guru”.
Thought 7. Buy one or more properties from one of the above routes.
These steps are what I call Boxed-In Property – the way that newcomers are subtly guided by a well-established industry where vested interests abound. There are many who will carefully guide you through this process, sometimes at the fierce exclusion of all other options, to deliver you a cheap buy to let property in a “hotspot”.
This is complicated, hard work and expensive.
I confess I’m not always welcome at traditional UK property network events, as I’m liable to let slip that among the well-tuned systems and seminars in place there to encourage investors buy more flats and houses in ever cleverer ways, the emperor has no clothes, or at least a very skimpy mankini. The seemingly unquestionable assumption from the floor is always that “this is how you make money in property”, that there is no other way, let alone a better one. To dare to suggest otherwise is to be met with a frosty reception, as if you were calling their baby ugly.
The Elephant in the Room
Take for example when surprisingly negative cashflow results from all the unexpected landlord purchase costs and expenses. These, along with the litany of UK legal lettings requirements often shock the new landlord investor once they’ve taken the plunge. Many experts will fail to mention these crucial factors when selling you your first buy-to-let.
The truth is, UK residential buy-to-let everyone that wants to profit from property. It requires a dedication to the cause: an on-going commitment of time as well as money, a considerable risk of putting all your financial eggs all in one property basket. And it may not be right for you.
Here’s the twist. Back in the late 90’s and early naughties, I became the landlord that did all of the above! My goal was a truly passive income through property, but instead I became the inadvertant manager of what was almost a second full-time job. Hardly passive by any stretch of the imagination.
Was it profitable? The short answer is nowhere near what was promised. Subtle regular charges from a burgeoning support industry built around landlords serve to erode your income and profit and make you wonder why you started. This very week I have a tenant moving out of my one-bedroom Berkshire flat, which requires : new carpets throughout; total redecoration; a new refrigerator and washing machine. Followed swiftly by check-in/out costs and tenant find fees. That amounts to a loss of around six months net profits every 5 years, and that is not untypical.
Being a landlord (or Buy to Let investor) works well for a specific group of people but is completely unsuitable for many, and sub-optimal for most.
I love property investment. But I love doing it right, better!
A simple solution: co-fund a fully-managed very-high-yielding property development that when complete gives you a share of of the rental income, security of property ownership and easy ways to exit your investment when you want to, preferably with guaranteed capital growth. Sounds easy to say but hard to achieve? Not with the right partners to guide you.
Property out of a box?
Commercial hotel and resort property investment has achieved a maturity not seen in the past, and can offer secure NET yields into double digits. The trick is funding a trusted advisor who “tells it as it is” based on specialist expertise and a wealth of experience in all kinds of property investment. Once you have researched your investment options, ownership is easy, inexpensive to purchase and run, and highly enjoyable.
If you’re considering property investment and wish to intelligently consider all the options, download our guide and have a chat with us afterwards.
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Walter Unger CCIM
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