Dear Investor,
The facts you should know about discount property investment companies and how to be certain that you are getting a “true” discount.
I’m not a professional ad writer. I’m a property investor but what I have to say is so important that I decided to sit down to write you this message in the best way I know.
Lately I’ve had a lot of people asking me about discount property investment companies and more importantly about why they have become so popular for buying discount property and building a property portfolio through.
Even though I tried and tried to write a good ad telling people all about property investment companies, I just couldn’t do it. So I finally thought — why not just tell you exactly what I’d tell you if we sat down for a cup of coffee?
So for those of you that do not understand exactly how a discount property investment companies can benefit you, let me explain. A discount property investment companyť can help you in three profound ways.
What a discount property investment company should do for you:
- They will save you time and create instant equity for you by sourcing the best performing properties across the UK and in the process they will negotiate discounts of between 10% and 15% for you.
- They will then manage the process of buying the property for you, from reservation through to completion and letting.
- Finally, they will support you to create a portfolio of properties which over time will create significant equity and positive cash flow that will allow you to enjoy the lifestyle you’ve always wanted for yourself and your family.
My own experience as Managing Director of Your Property Club and a number of other property-related companies has proven one thing beyond a doubt:
People just like you are looking for a simple and secure way to invest in property without the need to spend countless researching, building relationships and managing the process of buying.That’s why Your Property Club’s number one purpose is so simple: to simplify the process and allow you to effortlessly build a portfolio of buy to let properties, leaving you time for more important things.
We get up early. We scour. We schmooze. We hunt the best deals we can find, and give them to you.
We do the hard work so you don’t have to
In fact, we’ve recently hired some of the finest property scouts in the biz to drive the length and breath of the country for us and search out the best performing properties, the best value deals and the most exciting up and coming hotspots.
Their brief is to provide us with detailed, on-the-ground research of each local area they investigate. We then double-confirm the information they provide us with our own, even more detailed research into local councils, governments and community groups. All this goes into the mix to create an amazingly detailed picture of the future potential for both equity growth and the letting of your investment.
To give you an idea of how stringent our property filter is; our property scouts will examine up to 20 developments each and every week.
They will immediately filter out 18 or 19 of these as unsuitable, bring the remaining ones back to us onto which subject our rigorous 81 point due diligence process.
Our super-thorough process means we may end up presenting something new to our members every two or three weeks, but it’s this attention to detail that allows them to invest with confidence and certainty.
Each investment comes with its own detailed prospectus, summarising everything you need to know in nitty-gritty detail. Floor plans, white papers, council plans, local area info — literally hundreds of hours of research, hard work, and tough questions all rolled into a single easy to understand report; and it’s all available our members at no charge.
If you’d like to find out exactly which investments have recently passed the ‘unreasonable’ standards we set, simply click here for our brief membership form.
Why developers will happily pass 10-15% of their profit to a discount property investment company?
Developers are happy to pass on discounts for a number of reasons.
1. Developers often need to secure seed capital
When a developer wants to begin a development they will normally require funding and their bankers will require they show a certain amount of sales ‘off the plan’. The developer can either invest in marketing directly to the general public or offer a discount to a property investment company like ours with access to active investors. For this they are happy to pass on a discount that they would normally lose to marketing.
You’ll normally find that a high percentage of the total number of plots are offered in this way and they normally present the best long term growth potential.
2. Developers need to achieve year-end sales targets
If an area sales manager has a sales target to achieve they may pass a number of plots to a property investment company to sell quickly. In return for the short timeframe they’ll offer great discounts. You will normally find that between 5-25% of plots in any given development are offered in this way and normally present a great short term return on capital.
3. Developers need to sell the final few plots
The developer will normally have sold most of the plots and has only a few left which are eating into their precious profits through their onerous holding costs. They’ll pass these to a property investment company to sell quickly and allow the developer to close the sales office and complete the entire project. These offer a quick turnaround to completion and make “flipping” easy as you are selling on a completed property.
Beware!!
Before you get too excited about any 10-15% discount, you need to understand what an “inflated valuation” is.
In some cases that we’ve seen, builders and property investment clubs alike will inflate the actual true valuation of the property in order to advertise discounts off this valuation. In some cases the inflation can be 10-15% higher than the true valuation.
Luckily, there’s a simple way to protect yourself. Every valuation you’re given must be backed up with a written valuation from a surveyor registered with the Royal Institute of Chartered Surveyors (RICS). Additionally, the valuer should also be on the panel of lenders that you wish to choose for your mortgage.
Property investment companies will sometimes try and convince you that it’s not a problem since “you’ll be using their solicitors and mortgage brokers”. This is a tell-tale sign of price inflation. Be very wary since you may not discover that you’ve been the victim of an inflated valuation until you attempt to re-mortgage the property after completion!
So now that we have looked at the 3 major reasons why a developer will offer a discount lets answer the most commonly asked question.
So why can’t you go to the developer and get these discounts directly?
This answer is quite simple: volume and hassle.
It takes the developer roughly the same amount of time to deal with you as an individual buying one property as it does a property investment club who buys ten or more. Obviously a property investment club buying ten is of more value (from a profit perspective) than you buying just the one. It’s for this reason that the developer is happy to negotiate bulk discounts with property investment companies but not with individuals.
It can also be a question of relationship. Your Property Club has strong links with a number of developers who we have built considerable trust with. They know that when we take 10, 20, or even 200 properties from them that their problems are solved because of our relationship with our members. So much easier than having to deal with potentially unqualified buyers and uneducated investors.
How our clear communication will give you a great night’s sleep
If you have previously bought property or know someone that has, you well know how stressful and nerve-wracking the process can be. Dealing with mortgage brokers, solicitors, developers can be an onerous task; this is why we retain professionals heavily experienced in each area of buying property.
At Your Property Club, they’re called property consultants and their most important role is to call you before you need to call them.
As a Your Property Club client, we never want you to be out of the loop with your property. Your property consultant will communicate on your behalf with solicitors, mortgage brokers, developers and bring the whole deal to a smooth and peaceful conclusion. They will even assist the process of getting your first tenant.
Now that you are acquainted with your property consultant let’s introduce the next person who plays a key role in the development of your portfolio: your Property Portfolio Manager.
How to see the market through a professional’s eyes
The portfolio manager’s task is to bring the many investment opportunities to life. As they have a full understanding of your individual situation and current portfolio and they have an in-depth understanding of the investments on offer, they can best present the relative benefits and deficiencies in each opportunity.
Important!!
Let me digress here as this is an important point. Discount property investment companies and their team members are not subject to financial services authority (FSA) or other regulations. This means that they cannot recommend individual investments to you, what this means is that you must make the decisions yourself. They can point out potential outcomes, possible benefits but they must stop short of providing investment advice.
This means that the decision comes down to you and you alone. After all, it’s your signature on the mortgage documents, so you need to be very aware of this. You are always 100% responsible for your investment decisions. A good discount property investment company will always explain this to you.
Ok, let’s get back to the portfolio manager. Let’s talk about how exactly they’ll work their magic with your portfolio. It all comes down to 5 key qualities and your portfolio manager had better have all of them.
- They should understand the emotional aspects of investing
First, a good portfolio manager understands the various questions, concerns and fears that invariably pop up as her clients build their portfolio. For example, a common concern is fear over taking on a large mortgage. In most cases another look over the opportunity plus a little education is all that’s required to put the mind at ease. - They should understand the practical uses of off-plan property strategies in building your property portfolio
There are a number of more advanced strategies that can be employed in off-plan property, so an understanding of the strengths and weaknesses of each of these will ensure that you can maintain the growth and momentum of your portfolio and avoid the dreaded periods of stagnation. - They should understand how finance is structured
This is fundamental to building a large portfolio. The buy-to-let market is changing constantly. Lending guidelines will change too, but the underlying principles don’t. Your Portfolio Manager will be able to explain the basics of structuring your finances and refer you to a skilled mortgage broker if necessary. - They should have appropriate back office support
The back office support is important because a portfolio manager will normally see many clients in one day and their back office support will ensure that commitments made are actually kept in a timely manner. - Finally, and I feel most importantly, they should own and actively invest in property themselves
How can anyone tell you how to be successful in property until they are successful investors themselves? - Source the best performing properties around the UK
- Negotiate true discounts on your behalf of between 10-18%
- Manage the process of buying the property
- Present regular investment opportunities to you, outlining the comprehensive research that has been conducted by the company
- Explain the state of your current portfolio including potential equity for investing
- Educate you about the benefits and disadvantages of the various strategies that are open to you
- Provide a transparent referral service so that you may access skilled professionals for each of the investment functions: legal, finance, furniture, lettings and management.
I cannot stress enough about the importance of the above 5 qualities. They’re so easy to overlook when the sales pitch is wonderfully impressive. 10-25% off valuations, instant equity, no hassles property! The reality is that if you follow and adhere to the simplest of principles in property, take a long deep breath before any important decision, research thoroughly and/or build a trusted relationship you will normally come out on top.
Summary of what a discount property investment company will achieve for you:
Can we help?
I hope that this long letter proves to be highly informative and will aid you in making the best decision for you. Use the search bar on the left hand side of the site to search any topic regarding property or use the preset categories.
I can’t complete this informal chat until I have made the shameless promotion of my own company, Your Property Club. Please take some time to review the site and contact my office on 0207 812 1255 to find out exactly how we can help you achieve your financial goals, or simply click here if you’d like to register (it’s free!) and benefit from our expertise and advice.
I look forward to talking with you soon, and supporting you to build your property portfolio!
Brett Wood
Property Investor and Author