The investment deals buy-to-let investors should avoid
Property investment opportunities are not all created equal. Your home, for example, might not be great as a rental property. And if you’re a buy-to-let investor seeking to increase your income today, then you’ll want to buy positive cash flow properties in the best places to invest in property UK. Which property investment opportunities should you avoid?
1. Any cash flow negative investment property
If you’re a buy-to-let investor purchasing property for extra income, a negative cash flow property must be avoided. Don’t listen to a selling agent that tells you, “next year rental values are going to skyrocket”. They probably won’t. It doesn’t mean the property deal is a bad one, simply that it’s a bad one for you at the current price.
You could try to negotiate a discount from the asking price. It may even out the cash flow position, and switch up the value of the property’s investment potential.
Of course, if you are investing for capital gain rather than income, then a negative cash flow strategy could make you a wealthy investor.
2. Property in an area where people don’t rent
If your objective is to benefit from rental income, you’ve got to be certain that there will be demand from tenants. The first factor to look for is that where you are buying is a place in which people are renting already.
Do your due diligence, discover if people rent in the area, and what type of properties are in most demand. If your property doesn’t rent, then you’ll have to pay the mortgage and other costs yourself. Hopefully, it will rise in value, and you’ll be able to recoup your losses. But hope isn’t an investment strategy I’d recommend.
3. Timeshares
A friend of mine bought a timeshare property about ten years ago. He acted against my advice. The deal was that he’d be able to use the timeshare, or trade for a couple of weeks in a different location. If he didn’t use it, he’d get an income for the weeks he ‘sold’.
A decade later, and he’s had next to no income from the property. He’s been locked into the same holiday year in, year out. When he has traded in for a different timeshare, it’s always cost him money. Now he wants to sell. There is no market, and the timeshare company he bought from has offered him less money than he paid! Some investment that has been.
Another friend of mine bought an apartment in Spain. Right now, his investment is worth the same amount it was when he bought it a few years ago. He rents it out as a holiday let through a property management company in Spain. It’s well cared for, and he benefits from regular high yield income. And he doesn’t have to do very much for that income, even when he holidays there a couple of weeks every year.
4. Foreign property in a ‘bargain basement’ country
There are countries in which investment property is a solid asset and countries that you should avoid. In some countries, property values look like they are in the bargain basement. They may be, but they may not.
There is a big difference between overseas investors buying property in the UK (considered to be one of the best countries in the world for property investment) and other investors buying property in, say, Venezuela. The macroeconomic risks are very low for foreign investors in the UK. They are much higher in most other countries in the world. Such risks could destroy property value very quickly.
In addition to the possibility of your investment halving in value, if you are letting the property for, say, holiday lets, you also need to be aware that demand can fluctuate wildly. You only need to consider what is happening in countries like Turkey and Tunisia, where tourist numbers have crumbled because of political (and terrorist) troubles.
If you want a property investment which offers the best potential for positive cash flow, contact one of our team today on +44 (0)207 923 6100. We’ll discuss your objectives with you, and help you build a winning buy-to-let strategy. We’ll help you to locate the best places to invest in property UK and advise on how to manage your investment profitably. Don’t leave your financial future to the strategies of chance and hope.
Live with passion
Brett Alegre-Wood
