Buy below market value? Buy for £1? Or just property scams?

publication date: Aug 11, 2014
 | 
author/source: Kate Faulkner, Property Expert and Author of Which? Property Books
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What's a good deal and what's a property scam?

I have been working in the property market now since 1998. Although there are many a bad builder, plumber, landlord and tenant, one of the worst areas of the property market, for me, are property investment clubs and so called ‘property sourcers’.

Why don’t I like property investment clubs? 
One simple reason: I get all the complaints when it goes wrong – and there is very little I or you can do about it once you have handed over your money.


People will happily hand over hundreds and thousands of pounds for ‘seminars and courses’ which in my view are mostly a waste of time and money. Investors will then be ‘drawn in’ at these events and buy or invest in a property, paying thousands of pounds for the ‘deal’.

Next things start going wrong:-

  1. The deal doesn’t come off, so no property is found or a mortgage can’t be secured
    against it

  2. The rental income initially given was wrong and doesn’t cover the running costs

  3. There are ‘unexpected problems’ with the property requiring tens of thousands of
    pounds to fix.

By now though it’s too late, the money has been handed to the property investment club and they won’t pay it back.

 

How to buy below market value

How do you check out a ‘property deal’ 
There are lots of things you can do to check out a deal:-

  1. Have a good legal company check the ‘scheme’ eg lease options where you can buy a property for £1 or rent to rent where you rent the property off a landlord and then sub-let it. Contact us if you want one we use.

  2. Verify any suggesting value and discount with your own RICs surveyor. Contact us if you want one we use.

  3. I know it might be a long way away, but there is NO excuse for buying a property you have not seen and talking to local agents yourself.

Read our checklists:-

How to buy below market value
How to choose a letting agent

5 ways to check out a property investment company
You wouldn’t and shouldn’t just hand over money to people you don’t know – however charming they are! The best scam artists are fantastic fun, great to deal with and always come across as very honourable – it’s why they are good at their trade!

  1. Do a search on the directors – if you don’t know or can’t find out who they are,
    don’t invest!

  2. Have they a copy of any professional indemnity insurance (all estate agents have to
    have this)?

  3. Can they confirm – in writing – where your money will be held and how it is protected in a Client Money Protection account (all good, self-regulated letting agents do this)

  4. Check the legal agreement and T&Cs with an independent legal company (Contact us for help with this)

  5. Find out if they belong to any independent redress scheme eg The Property Ombudsman as most will be acting as an estate agent if they are introducing buyers and sellers and by law will need to be members.

See this report by the Telegraph in which I am quoted as it has some really useful advice too.

Take a look at some more of our FREE property checklists including:-


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Which? Property books and one of the UK's top property experts.
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