Some Worrying News
OK, so I've sent out two blogs giving you solid reasons why you should choose Gladfish to source investment property. Call it a shameful plug, call it good advice, for me I'm very proud of the standard of service you get, I'm proud of the whole team here at Gladfish that works hard on your behalf and I'm proud of the transparency you get with any deal we offer you and the guarantees that we offer in working with us.
As soon as I'd sent out my previous blogs, Mick from the Lincoln Office contacted me with some worrying news. Mick and his team operate to the very highest standards as laid out in various financial service industry laws, rules and regulations. But while doing their research they became increasingly aware of just how low some property companies will go to get hold of your money.
For example in the North East, they identified not one, but several property scams where people had lost their life savings based on the promises made by unscrupulous operators. In one scam, the property company promised to buy heavily discounted old properties, refurbish them and rent them out. They were so successful in getting money in from investors they couldn't keep up with sourcing the property. But the early property investors were getting impatient and wanted their rental income. To appease them, the company just started “guaranteeing” their rent and paid them it with the money taken from people investing later. The scheme was doomed, the Police shut it down, the Directors went to prison and the investors lost everything. One scam allegedly raised some $360,000,000 in a similar way. That's $360 million. Ridiculous.
So, let's turn a negative into a positive and learn from the research. Mick and I have come up with 5 top tips for you;
1. Never, ever, give the company you are buying a property from any of your cash!
The problem here is if you give a company your cash and it goes bust, you'll probably lose most if not all of it. Trying to get it back will be frustrating, time-consuming and probably pointless. Only ever lodge your monies with a solicitor. Solicitors operate in a regulated environment which means if something goes wrong you have a complaint redress scheme in place to deal with it. OK, in the worst case scenario there are still no hard guarantees you'll get all your money back even then but at least you'll have an authority taking the matter seriously.
The other side of this is companies that ask for large amounts of cash upfront as a prepayment for sourcing your property. This is another suckers game. Don't be fooled. I can name at least 5 companies (there are no doubt more) that have all taken clients money upfront like this ($50,000 and $100,000 upfront) and then gone bust taken all this money with them. Don't be a sucker.
The only exception to this will be paying the reservation and agents fees on a single property, in this case, that's just normal business process and something you will have to accept. But if they say pay huge amounts upfront or pay the deposit and costs to them, beware!
2. Check the property company's history.
Nowadays, it's very difficult for people to hide their past now that we have the internet and free information websites like Companies House, the FSA, and web-forums. Do your research, dig deep and ask lots of challenging questions. Look at how long the company (as a legal entity) has existed. Anything less than 3 years and I'd be very cautious, it means they didn't survive the downturn.
3. UK Property only!
Ok, maybe that's a bit of sweeping statement, but consider this. My team in Lincoln are approached daily by developers wanting to sell their property to our Fund. Phil Pick, my Fund Manager, interrogates any deal. He's a qualified member of the RICS and knows his stuff. He looked at several overseas developments and found that he couldn't rely on the valuations. On digging further, he soon realized the property was massively overvalued. In one case, a beach chalet was advertised at $260,000 more than its true value of about $240,000! Ouch. Overseas opportunities are so prevalent because they know they can massage the figures, and there will be plenty of gullible UK investors ready to throw their money at them.
Don't be fooled, the UK offers some of the best investment property fundamentals with excellent income and growth. The overseas property is probably 95% hype and 5% BS.
The UK property industry may not be regulated as a whole, but all the elements within it are. Like the solicitor, the RICS Valuer and the mortgage broker. They are so heavily regulated that in some cases these people can go to jail if they get it wrong. So again, if something goes wrong, in the UK you have a redress system that will take the matter seriously.
4. Don't pay Joining fees
This one gets me every time. Why do you need to pay a joining fee to a company that sources you a property? There is just no reason you should do this. Not for the investment education, not for the property sourcing and certainly not because it secures you the best deals.
5. Share the Risk
There are too many companies that want to sell you the property, and that's it. There's no education, no strategies, no ongoing support, no aftercare, etc., etc. Why? Because they're only interested in your money. Not you, not your goals, not your emotional state and absolutely do not want to hear from you when something goes wrong.
Property investment is a massive thing to be involved in. It's time-consuming, requires skill, the right industry contacts and ongoing expert advice and assistance. You need to work with a company that is involved with the whole process and stays involved (like letting the property out for you and offers some serious guarantees, gives you their mobiles).
Caveat Emptor!
So if you want a team behind you that doesn't hold your cash, has been hugely successful for almost 6 years now, will only get you into UK property, won't charge you a joining fee and is with you for the journey, speak to your Property Consultant on +44 (0)207 923 6100 or direct on their mobiles.
Live with passion,
Brett Alegre-Wood
