10 March 2008
Despite the current falls in the market, it is still possible to make a healthy profit from property, says the Property Investor’s Handbook, a Which? Essential Guide, published on 10 March.
Although it is now more difficult to make profit from traditional property investments such as buy-to-let and renovation, canny investors can still provide for their future by putting money into less conventional investments.
Buying properties off-plan, a highly speculative form of investment, can work well if a large discount is negotiated with the developer, which is more likely in this type of purchase. However, the Property Investor’s Handbook warns investors to do their homework first; building a sound knowledge of the local property market and ensuring the property’s real worth matches developers’ claims are crucial starting points.
There are large profits to be made from turning commercial properties into residential homes and buying land can be a tax efficient form of investment; though any viable investment requires considerable research before jumping in. Investment funds, clubs and syndicates* may be good for novice or time-short investors. However, a number of property investment clubs have been closed down by the OFT and Trading Standards for making misleading claims and promises, so proceed with caution.**
Kate Faulkner, author of Property Investor’s Handbook, a Which? Essential Guide, says:
“When the housing market is unstable property tends to fall out of favour as an investment. But many people don’t realise that property investment opportunities come in many forms; from joining a property fund to snapping up pieces of land. Done properly, investing in property can still provide a good return, but people need to look beyond buy-to-let and renovation.
“If you’re thinking of having a go, my first advice would be to really do your homework. Make double-sure you know exactly what type of investment is right for you, how much you can really afford to invest and whether property will give you the return you’re looking for.”
-Ends-
* Property funds are a way of buying into the property market as part of a collective group that can invest in several rather than just one property, or buying into property companies that own, rent or develop property. Property syndicates work in much the same way, but are more suitable for people who want a more hands on approach; one group of investors owns 100 per cent of the properties in the syndicate.
**Property Investment Clubs (PICs) can be appealing because they offer a way of gaining knowledge about investing in property. As well as education via seminars, forums and information packs, they offer members ‘discounts’ of up to 15 to 20 per cent on properties, therefore earning ‘instant equity’. However, these discounts may not be genuine. Some PICs increase the price of the property to above its true value so that even with the so-called ‘discount’, the member pays more than the property is worth.
Even if a discount is genuine, it may not be the great deal it seems. PICs can charge up to five per cent of the property price for their services and sometimes add a fixed fee on top, so the discount is swallowed up by charges.
Investors should seek independent advice and visit the property and the area before buying.
Property Investor’s Handbook, a Which? Essential Guide, is written by Kate Faulkner and will be published on 10 March 2008. The book can be ordered on 01903 828557 (£10.99, p&p free) or at www.which.co.uk or bought from bookshops.
About the Author
Kate Faulkner has written extensively on property and is the author of three other Which? Essential Guides – Buy Sell Move House, Renting and Letting and Develop your Property. As well as writing on the subject, Kate has worked in the property industry for over ten years. She has bought, sold and renovated houses for profit and invested in property for the long term. Her website, www.designsonproperty.co.uk, provides independent answers to people’s property questions in the UK and abroad.
