Don’t base your investment decisions on those who don’t have to deal with the results

Emilia Woodhouse

 

So Emilia, why have you spelt faux instead of foe in the title of this post? Well, the definition for faux according to the dictionary is:

  • Made in imitation; artificial
  • Not genuine; fake or false

So it isn’t a typo, it is written like that on purpose and you will see why …

 

Please do not be fooled by “property mentoring” companies or “buy to let specialists”. You do not need these to become successful.

 

They claim they offer a big list of Below Market Value (BMV) properties and in the cold light of day you may be lucky to get 1-5 a month with helpful stacking software and a team of staff to assist you with every step of the way and all that for £1000 per year. WOW sounds great right?

 

Well what happens when they don’t fulfill their end of the bargain? I propose, if you chose to use these companies, get them to sign an agreement which states what happens when they don’t fulfill their end of the bargain, as the contract they will get you to sign will be protection for them and only them. Please don’t fall into their trap, keep your eyes open through every stage of the process. They are not your friends.

 

TIP: Insist on the contract having specific penalties that will be triggered when they do not fulfil their obligations. If the company is not willing to do this, ask yourself (and them) why? Why are they not prepared to hold themselves accountable to their own claims of what they can do?

Visit www.clickdocs.co.uk. There is a whole library of contracts you can use.  

 

We know the penalty we will endure if we don’t do our bit…. we pay the fee and get nothing for it! But if we don’t follow through we should face the consequences, the same should go for them.

 

You have paid your yearly fee, paid reservation fees with a “sourcing cost”, so before you have actually put a deposit down you have already spent £7000. Then there’s putting the deposit down, solicitor’s fees, stamp duty at 3% (if the property value is over £40,000) mortgage fees, making the property rentable, advertising the property on the rental market and estate agency fees (if you choose an agent to find and management the tenancy) so all in all you could be looking at investing at least £44,000. This simply isn’t necessary.

 


Example;

Without a “property mentoring” company or “buy to let specialists”:

3 Bedroom Property  £  100,000
20% Deposit  £    20,000
Stamp Duty  £      3,000
Solicitors Fees  £      1,500
Mortgage Fees  £      2,500
Making It Rentable  £    10,000
 £    37,000

 

 

With  a “property mentoring” company or “buy to let specialists”:

3 Bedroom Property  £ 100,000
Mentoring Fees  £     1,000
Buy To Let Specialists  £     6,000
20% Deposit  £   20,000
Stamp Duty  £     3,000
Solicitors Fees  £     1,500
Mortgage Fees  £     2,500
Making It Rentable  £   10,000
 £   44,000

 

That means the first £7,000 of profit that you make goes to someone else!

OUCH!

 

Now it’s ready for rent we need to market the property with an agent.

 

Property is empty for up to 4 months (1 month making the property rent ready) which is 4 months mortgage payments £265 pcm, council tax as there are no exemptions for empty properties at present, and utility bills including insurance = £400 – £500 pcm

 

So now we are in a situation where you have invested £44,000 before we have received any rent in which will affect your ROI/yield and that extra £7000 could go towards your next property … how great is that.

 

 


You may choose to source your properties through these companies (which is fine, everyone has their own investment strategy) However please be aware of the following.

PLEASE DO NOT BLINDLY ACCEPT THEIR FIGURES THEY SEND THROUGH. They will send up “regular” brochures through of Below Market Value (BMV) properties with purchase price, market value, all fees, mortgage payments, achievable rent etc…I have been a member of Z companies and 100% of the time the market value and achievable rental income have been inflated by at least 30%. This severely affects your bottom line and if you get that wrong then you are in for a world of emotional and financial pain and ultimately, you only have yourself to blame (if you read this post and ignore it – please don’t, I really want to prevent anyone going through this because you have put your trust into the wrong persons hands) They are trying to sell you a house for them to earn a profit … so why would they actually help you to build your wealth.

(reviews of these companies are coming soon)

 

Therefore, spending time completing your own research on the local area, market value and achievable rent etc is key. I can’t stress this enough.

 

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TTFN

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