There are two rules to property investment. Number one – if it sounds too good to be true, it probably is. And number two – if it seems dodgy, don’t risk it.
There’s a mistaken belief that to cash in on the property world you need to be playing it fast and loose, investing in creative schemes and get rich quick initiatives when in fact the safest and most lucrative form of property investment is the traditional route. I hear from investors regularly about new and “innovative” property investments that they’ve been assured they’ll make a killing on and 99 per cent of the time I’m advising them to steer clear.
Student pods are a prime example. Why invest in a house, claim the marketeers, when you can invest in a room? In a building you don’t own, with a lease you don’t own and essentially have no control over your investment whatsoever… Student pods are a new phenomenon. They’ve emerged as an investment vehicle since students have started to turn up their noses at The Young Ones-style dives on the outskirts of city centres in favour of all mod cons, wifi and ensuite rooms. Read more: This is the most expensive house in America. And it’s awful
Developers have tried to cash in on the appetite for student property investments by offering dorm rooms for sale, as a hands-off investments. Avoid these. There is absolutely no resale market and the promised returns are almost always inflated.
Hotel investments offer a similar concept. Investors can buy a hotel room and earn a return from it being let. It’s not real buy to let. You don’t really own anything and the returns will be unimpressive.
Perhaps a less obvious example of an investment you should steer clear of is overseas property. If you’re looking for a holiday home, that’s all well and good but all too often would-be investors think they can take a punt on the overseas market because properties are cheaper. They often end up getting seriously burnt. Trying to be an expert in a country you’ve not had any exposure to is a recipe for disaster. Currency risks, different legal systems and property laws make it a risk not worth taking.
Of course, one of the most common forms of property investment-gone-wrong when it comes to overseas markets (and the subject of many Channel 5 documentaries) is buying off plan. You know the drill, a UK couple jump at the chance to buy a dream property abroad and invest in what all the CGIs suggest is going to be a tower of luxury apartments only for the bulldozers to grind to a halt and the developer to go bust. Read more: Property investments you don’t need a CEO’s salary for
Unfortunately, you don’t have to go abroad to find such stories and they almost always involve a new developer with no track record. While buying off-plan property can give you the opportunity to get a discount there are certain things you shouldn’t do – and top of the list is buying from a developer with no history.
Finally, be sure to avoid taking on any time intensive projects if you’re time poor. We can all watch Grand Designs and get inspired but if you have a few hours to spare in between working your nine-to-five and raising the kids, is taking on a major refurb and serving as project manager the wisest of moves? Be realistic or the chances are your first investment will be your last.