8th August, 2013 BACK TO ALL PODCASTS

This week we’re taking a break from our usual pragmatism, and talking about 5 types of property investment you should definitely avoid.

They are…

  • Student pods
  • Hotel rooms
  • Overseas “hotspots” in marketing brochures
  • “Bargain” properties with no rental demand
  • Time-intensive investments if you’re busy

Why are we picking on these particular types of investment? You’ll just have to listen to the episode to find out…

The main themes that came through were the importance of doing your own research, looking past the marketing spin, and educating yourself (by listening to this podcast!) so you know the right questions to ask in any situation.

Also, you should read…
– Rob B’s post on why he won’t sell student pods
– And his post on why he won’t sell hotel rooms

Resource of the week

Our resource this week came from a listener – Rob Hayward – who wrote in to tell us about an iPhone app he created that’s relevant for property investors.

His High Speed Rail app shows with a beautiful graphical interface exactly where the proposed routes of HS1 and HS2 will run – and by putting in any postcode you can see how far the line will be from the property.

As an investor, you can use it to check out areas to avoid, or maybe areas of opportunity depending on your strategy.

This week’s news

MPs this week vented their thoughts on the private rented sector, and we talked through what they had to say in notes from a Communities and Local Government Committee meeting.

We discussed what they had to say about regulation of letting agents, barriers to longer tenancies, and tenants and landlords not knowing their rights.

Mentions this week

Rob B announced the launch of his new podcast, Property News Radio. In under 15 minutes each week, Rob will bring you up-to-date with everything you need to know that affects you as a property investor. Go subscribe!

He also lifted the lid on his new project, an iPhone and Android app for property investors. Go sign up to his pre-launch mailing list to get updates and be the first to find out when it’s launched.

Finally, The Property Podcast has a YouTube channel! If you want to listen to the episode on YouTube, or have a new way of sharing it with friends who don’t really get what a podcast is, send them the link.

Tell us what you thought of the show!

Do you agree with the investments we warned against?

Any others you think should have been on the list?

Just let us know by leaving a comment below!

If you enjoy The Property Podcast, please leave us a review on iTunes

Reviews are really important in helping other people to find the show, so by way of thanks we read out every single review we receive.

If you’d like to hear your name on the show, leave us a review on iTunes here. Not sure how to do it? This video shows you how to review and subscribe.

Full transcript

Rob Bence: It’s time for The Property Podcast where every week tens of thousands of property investors new and experienced join together to get news, knowledge and laughs at our expense with me, Rob Bence

Rob Dix: And me, Rob Dix.  Join us every Thursday morning for your weekly dose of property ideas and motivation.  Then, head over to our website at PropertyPodcast.com to keep the conversation going.  Now then, let’s get started.

Rob B: Welcome to The Property Podcast Episode 21.

Rob D: We’re going to be talking about “Five Property Investments you should Avoid” this week, words of warning.  But also we’re going to be talking about news story about proposed changes to private rent detector.  And we’ve got a really interesting app as our resource of the week which is actually submitted by one of our listeners.

Rob B: Yeah.  It’s fantastic, I look forward to giving you that one further down the line.  But before we get going, we always like to start with our five star reviews because we really, really appreciate them.  And thank you the following.

The first review comes from thepropertycouple and it says, “Informative, witty, brilliant and to coin a phrase from a famous beer offer probably the best property podcast in the world.  Keep up the good work guys.  The UK needed something like this.”  What a great review.  Thank you so much to thepropertycouple, really appreciate that.

[0:01:21], I apologize if – well, definitely one of them is going to be wrong but I apologize for pronouncing your name wrong there but your review is fantastic so we really appreciate it.  It says, “You guys are great.  I can’t believe how good your show is.  I’m very pleased as I’m writing this review.  I’m currently listening to 007 Episode.  Best property podcast I have come across to date.  You guys are not boring :D”  Thank you very much.

Two great reviews.  Please do keep them coming.  There’s plenty more for us to [0:01:49] but we really appreciate it.

And we got some new software particularly related to our overseas listeners.  We will not forget you.  So, if you’re listening in a different country then please do leave a review because we have some software not called “Comment Cast” and it allows us to see reviews around the world.  Australia is actually overtaken the US as our second most listened to country now.  So, a lot of people in Australia.  There’s a few reviews taken in from there as well.  Hello Australia!  Thank you for listening and please continue with the support.  We appreciate it.  And we’ll read your reviews out soon.

Rob D: Do your nation proud.  We have lead table of the most reviews from each country.  There can be an incentive.  We do absolutely love those reviews wherever they’re coming from.

Rob, we’re going to move on talking about what we’ve been up to this week.  And you’ve got some more podcast news right, don’t you?

Rob B: Yes.  I’ve been talking about it for awhile and I finally done it.  The Property News Radio, the new podcast, is now out.  So, please go to the iTunes store and if you can support it even a fraction of what you’ve done to The Property Podcast that would be a huge success.

Well, any podcast that’s new you really need reviews to get it off the ground.  So, if you could listen and leave a review, a positive one, I’d really appreciate it.  I mentioned it before, the concept is it’s less than 15 minutes and it gives you the news of what’s happening each week in property investment.  By the end of the 15 minutes you’ll know more about what’s happening in the sector.  As an investor or if you’re going to be an investor, you’ll know a lot more each week just by investing 15 minutes.

A few people have asked for something like this so I put it together.  I hope you like.

Rob D: I’ve said it before but that I’m going to be listener number one.  I didn’t know it was going live until we spoke just now.  I’ve got an RSS feed of about 400 unread articles about property.  I never seem to get around to catching up on what’s been going on.  If I do, I’m about two weeks behind.  That would be perfect for me.  I’ll definitely be tuning in.

Rob B: So, I’ve got one listener.  If anybody else can join, I’d really appreciate it.  My mom doesn’t even listen so I do need them.  And also, I’m building a new app for the App Store and actually on Android as well.  I normally hulk on Apple but it will be on Android and it will be on Apple as well so any Apple device or Android device this app will be built.  And as you probably are not shocked to find out it’s an app about property investment.  It’s being built as we speak.  It will take a little bit of time.  But if you like to be informed of when this app is launched and get it for free, I’ll definitely keep it free for the beginning.  So if you want to get it for go to propertyinvestmentapp.com and it’s just a page there where you can leave your email address.  You won’t get anything else except updates about the app so there’ll be no spam, no selling.  It’ll just be information about the app.  And hopefully you can get involved.  Tell me what you want in the app, what you don’t want in the app.  It’s there.  I’m going to build an app for everyone.  It’s going to have loads of features in there which will be very useful to property investors.

But if you’d like to be kept informed of the progress of the app and make sure you’re notified when it goes live then go to propertyinvestmentapp.com and leave your email there and I’ll keep you up-to-date with what’s happening.

Rob D: I’ll be doing that as well.  I didn’t know you the app.  Obviously you’re dominating, podcasts, apps, blogs, the works.

Rob B: I just like to keep busy.

Rob D: I love it.

Rob B: Well, you’ve got a book.  When you brought out it looks like Rob’s doing more and I’m looking lazy.

Rob D: How can I [0:04:46]?

Rob B: Let’s compete.

Rob D: My DVD series is out next week.  But speaking of dominating, we’re now spreading the podcast a bit further than we were before because we’ve got a new YouTube channel.  A lot of people search YouTube for things to do with property investment.  I know I often do.  And we thought it would be really nice to have people on YouTube for them to have a way to discover what we’re doing here.  Listen to the episode on YouTube and then send them over.  If that’s the way you like to it or if you just got friends who are YouTube addicts then you think they’re more likely to listen that way than go over to iTunes and do things like that, then you can send them towards our YouTube channel.  YouTube didn’t give me the friendliest of names so I’m not going to attempt to read out the link but we’re going to put it in the show notes which is going to be at ThePropertyPodcast.com/21 so you can check that out as well.  We are everywhere.

Rob B: I hope you like us because you haven’t got much choice.  You’re going to keep bumping into us across the net.

Let’s get down to business.  News of the week.  The news piece this week comes from actually the Government.  The Government, the commons [0:05:45] committee are on a mission.  They want to drive out their words, “cowboy letting agents” [0:05:51].  It’s actually going to put together and take to make sure that some of the less desirable letting agents out there and there are a few to get them out the industry because unfortunately it’s not regulated.  The report obviously proposes one of the big things is bringing in regulation for letting agents.

Now, this is not [0:06:10] letting agencies.  There are some fantastic letting agents out there I must say.  But those fantastic letting agents know that there are just as many terrible letting agents.  And you know Rob, I know I’ve come across them and I’m sure you have.  I speak to a lot of letting agents.  There’s just so much incredible but some you think, “God, why are you taking people’s money?  You’re causing more trouble than you’re worth.”

It’s interesting to see that the government now has stepped in to do something about it  I don’t think property investment companies will be too far behind [0:06:37] although there are good companies, there are bad ones as well.  I think it’s welcome.

Rob D: [0:06:43] same thing in your industry as well.  If there’s a dodgy company, it kind of ruin it for everyone.  Everyone’s tired of the same brush.  With letting agents, it’s kind of mad that things have been allowed to carry on for as long as they have done.  Maybe it’s now that more people are renting and people are going to be renting for the longer term, it’s more of a hot political issue than it was.

But that’s great news because it means that there’s going to be regulations and no one can get ripped off.  And on the top end, it’s going to allow people to flourish because they’re not going to be tarred by the lesser agents in the business.

But there’s some other proposals bundled up in there as well.  They’re talking about removing barriers to longer tenancies which is another interesting thing, something I know landlords are interested in as well.  They might need some legal changes to make it easier to get rid of tenants who don’t pay if the tenancy is longer.

And they’re also talking about tenants and landlords not knowing their rights and responsibilities.  For me, that’s a really big one.  I think there’s a research by Right Move that says 30 percent of all private landlords are accidental landlords.  That’s kind of a really scary number because there are so many rules and regulations and obligations, things you have to do as a landlord or investor.  There are a lot of people that aren’t going to be aware of and that potentially putting them in jeopardy and it means tenants aren’t going to have a great experience and tenants in turn aren’t aware of what they need to do.

I didn’t read anything there by what it actually propose to do about it but it seems it would be helpful to – seeing that you’ve got millions of landlords and millions of tenants in the country to have some kind of way of educating everyone of how they should be doing things and having a better experience for everyone.

Rob B: It’s a step in the right direction.  I’m please that the government have – normally government intervention doesn’t always end up in a success story.  But hopefully the government stepping in here will make it a more positive experience for investors and landlords across the country.

We’ll keep an eye on that.  We’ll keep you informed.  But it’s definitely stepping in the right direction.

Rob D: Let’s get moving on then to the topic of the week. We talk a lot on this podcast about how the type of investment you go for should be determined by your goals and your specific situation and always be careful about it.  We can’t recommend anyone entity.  But we’re going to stick on [0:08:45] this week and name some investment that we wouldn’t recommend to anyone.  We just don’t think that they are right for one reason or another.

We picked out five of them so we’re going to run through them, explain what they are and tell you why we don’t think they’re recommended, whatever your situation is.

So, Rob kick us off.

Rob B: Yeah, the first one if you’re long time listeners of the podcast you’ll know I’ve mentioned this before.  It’s quite interesting Rob because we’ve been very diplomatic over the first 19 episodes, 20 episodes.  Now, we’re at 21 and the gloves are off and we’re going for it.

But this investment is actually known in the industry for being anti, this investment.  I’ve been quoted in National Press over this.  It’s student pads.  I have an issue with them.  I actually wrote the article last year and it’s really been interesting to see what happened since because some of the things I’ve predicted have come true.  I’m not Mystic Meg but for me it was just common sense.  The investment, they were very well marketed

Let me tell you what a student pad is before we go onto more detail why I don’t like it.  Student pad is effectively a student room or student [0:09:49] however you want to call it, within a block.  You own that room and you rent it out a students and they will often be come with a guaranteed rent or some sort maybe a couple of years or sometimes longer.  They may say, “Okay, this student pad is 40,000 to buy and we’ll guarantee you a rent of 10 percent each year.” Sounds very attractive on the surface.

It does sound very attractive, hands off guaranteed returns.  What’s the issue? Well, first one for me is capital growth.  On average UK properties has doubled every 9, 10 years or so.  That’s not an opinion.  That’s not marketing talk.  That’s fact. You can go and have a look for yourself.  Go for the data.

Will student pads enjoy that same growth?  Actually, no chance.  Student pads will only rise in value if they yield rise in value because only investors are going to buy it from you. That’s really lead down to my second point.  But if only investors are going to buy it from you, that’s your only option to get out of there.  Then, that’s really limiting on who will buy the property and therefore the capital growth because it’s not a normal property investment.  It’s not like Rob can buy and move in when he comes back to the UK because he’s not a student.  It’s not that type of investment.

Capital growth is major one there because that’s one of the reasons why we invest in property for the long term growth.  It’s just not going to happen in a student pad.

The second thing I want to mention is the reseller options.  If you buy a normal property, whether it be a flat of a house, you can sell it to first time buyers, families, pensioners, students, investors, whoever.  Your options are vast.  There’s plenty of people you can sell to and rent to in fact.

The reseller options are huge. Student pads, as I already said, you can only let that to students.  So, what happens if the area that your student pad is, that university suddenly goes downhill or there’s suddenly an oversupply of that property?  There’s not much you can do about it.  Students are your only market and that puts you at risk.

Pricing is another one.  I feel they’re overpriced for what they are.  Most of the time, banks that lends on student pads – there are some lending options out there but most of the time they don’t.  So, if the bank doesn’t say it’s a safe bet then you should stay clear.  There’s a reason why won’t lend.  There’s a reason why they lend on property.  The commissions are really high for the student pads as well.  I know. I’ve been up with them.  I’ve been up as much as 20 percent to sell them.  So, I can make a lot of money but I just refuse because if I wouldn’t buy them then I wouldn’t put them to my investors.  I’m not motivated by greed.

That’s what I initially talked about in the article. And we’ll link to the article in the show notes.

What happened since is quite interesting because I wrote the article over a year ago and there’s been really interesting threads on property tribes and we’ll link to them in the show notes of course so you can see them for yourself.

But the two big reasons people bought is property is where the guarantee grants and the hands off.  Now, what happens with quite a number of these investments is the guaranteed rental companies that were paying the investors have gone under, have been wrapped up and stopped paying the rents out. So, suddenly people have got to go and find the tenants themselves so it’s not too hands off now.  And also, they’ve actually found that the market in the area, the rent’s actually a lot lower than what was being paid out.  They may be only getting half the returns of 4 or 5 percent, 6 at most compared to the 10 percent we’re getting.

Now, for me those guarantee yields were priced in to the students pads themselves are overpriced.  And what they’re probably doing, I’m not saying every student pad is the case but a lot of them seem to have done is price in the returns for a year or two.  You’re effectively just paying it yourself because you overpaid for the property.  Now, there’s big margins in these student pads.  I’m sure there are some people who set them up correctly and they’re all legitimate investments.  But a lot of undesirable characters have got into this market as well.  And the whole market has been driven by investment companies, marketing companies.  It’s not being driven by a general demand.  It’s being driven by them, investment companies, marketing companies.

So, I’m quite passionate on this one.  I’m sorry if you bought a student pad.  I’m not trying to make you worried or scared although I probably have.  All I would say is you have considered something like this, go in read my article.  Go and read the articles and threads on student pads over at Property Tribes.  And I think that may help you make your decision.  So, don’t just take my word for it.  Look at the masses.  Look at the forum.  You’ll see not just one person who’s lost money on these.  There’s a lot of people unfortunately.

Student pads, Rob, that’s one a person would never invest in.

Rob D: I got that impression while you’re talking.  I don’t have a lot to add to that.  I completely agree.  Everything else aside, I’m suspicious when there’s anything they have to invest so much money into marketing and convincing you to buy it.  If it doesn’t sell itself and takes much effort in convincing someone, then it’s not going to be all that great.  That ties in as well, I know what you’re going to talk about next because I’ve seen adverts for this next type of investment on the side of buses.  You don’t go that with your standard terraces or anything.

Rob B: The next one is very similar. It’s just packaged up in a different format.  It’s hotel room investments. You may have seen this really heavily marketed.  They’re very similar to student pads.  Basically, you buy a hotel room with maybe in a major city, London or even overseas.  And you buy your room and the management company will rent it out for you and you get the return.  The sold is hands off in big cities but the same problems.  There’s the capital growth issue.  Who’s going to buy it from?  There’s a resell options issue.

The pricing, they’re massively overpriced because they pay out huge commissions.  I believe the returns are often factored into the price as well.  There’s lack of leverage.  Quite often you can’t get lending on these properties.  Leverage is a big plus points in property investment.  That’s always a bit of a no-no for me.

Many of them are fractual ownership.  You can buy a hotel room outright but a lot of them are marketed where you take a fraction of the ownership of the hotel room.  So, you may buy 25 percent of it and three other investors you don’t know buy 25 percent of it.  Fractual ownership is a nice word for time shared.  It’s just a re-branding.  Time share hasn’t got the best reputation.  The words “time share” people think, “I don’t want to go there”.  So, instead of coming with a hotel room time share they call it hotel room fractual ownership.  Sounds more scientific, doesn’t it?  It’s pretty much the same thing.  You buy a share of that property.

For me, who’s going to buy it or any other investor?  Is there a big market for this, a big resell market?  No.  The only people who’s really selling this are these companies who are on big commissions.  I believe that although in their hearts, they think they’re selling you something that’s worthwhile, look at it really.  Capital growth, no leverage options, way overpriced, resell options are extremely limited.  I’m not a fan of fractual ownership as well.  So, hotel rooms are very similar to student pads.  Not one I would ever invest in and not one I would definitely pass on to my investors.

Rob D: And if you look at all the advantages things like being marketed at hands off and everything, there are ways of accomplishing that same thing with more traditional investment that don’t have all these downsides.  So, it’s really hard to see what the upside is.  And again, you’re paying for the marketing.  You’re paying for the commissions that are being paid out.  There are never going to be a bargain, are they?

Rob B: No, there are not.  And I know this podcast will going to [0:16:59] few people off because I know people in the industry are listening to this podcast.  But you   know guys, if you’re selling it have a look.  Think again.  Are you doing the best service for your investors?

Rob D: Let’s move on to another type of investment and number three is buying anything overseas hotspots from a marketing brochure.  This isn’t saying don’t buy abroad at all.  But it’s just saying be wary of things again that are marketed in a particular way.

We’ve seen very recently what happened when things get out of control and marketers go overexcited and sell people on certain claims.  In Spain for example, 2.2 million unsold homes at the moment.  That’s going to take best part of the decade to work through or they’re going to be demolished or something.

And then, in Bulgaria which everyone’s getting very excited about for a while, prices are now up 40 percent of their all time high which is in 2008.  They were both being marketed as hotspots.  It’s like “Get in now, this is going rump away.  This is going to be big.  You need to get in.  Place in the sun…”  All these marketing brochures, all these companies selling these stuff and now, look at them.

The point is that when you get all these marketing claims, it’s hard to evaluate how much of that is true.  And it’s hard to know who can be trusted. You got all these companies bringing up and trying to persuade you of things and you really don’t know what’s legit and what isn’t.  Then into that mix, you can add the fact that there’s an unfamiliar legal system that you might not understand properly.  There’s planning laws that you might not understand.  There’s currency risk.  And there’s all kinds of peculiarities that you won’t be aware of.

Again, it’s not saying don’t buy abroad at all.  But you just have to be very cautious around claims that prices are going to double in the next couple of years or something like that because sometimes they will but they’ll come crashing back down again as we’ve seen or they won’t go anywhere at all or you end up dealing with someone scrupulous and you lose your money.

Really it’s about going beyond the brochures and doing your own research and seeing if the price rises that are being promised are going to happen at all or if they’re sustainable.  Or really what I would do is tripping out any possibility of price rises, forgetting all about it and getting back to the basics looking at the yields and looking at the fundamentals of the area sort of see what it’s actually like and get on the ground yourself and assess it and not just going through the brochure.

Anything on overseas hotspot is something that I would not be buying unless I disregarded all that done my own result as well.

Rob B: I mean hindsight is a wonderful thing.  So, when the property market was booming it was very appealing to invest in these countries.  UK as well.  There was an overheat at one point too.  You can almost believe that, I’ve said this before, this time the boom is different and prices will continue to surge.

I was very lucky.  I used to work over in Cyprus and I was in the middle of buying a villa.  The deal collapsed in the very last minute.  Everything was defectively exchanged.  We even furnished the villa.  That’s how sure we were of it going through.  We very much committed, me and my investment partner, we’re very committed in buying the villa.  At last minute the banks pulled the deal and it was just before the credit crunch started.  I could have twisted that story and say I pulled out of the deal the last minute because it was incredible in sight.  No one has predicted the credit crunch.  Far from it, I got incredibly lucky.  I know a lot of people weren’t who invested in different countries overseas, Bulgaria, Spain, Cyprus.  The list goes on.  There’s loads of them.

What I would say is now we have that crash, you got learn your lessons.  The credit crunch for a lot of people are painful lesson.  For those people who got hurt financially or didn’t should still look at what happened and learn the lessons.

Marketing companies are pushing a country or an area, think, is this a good investment or is this being driven by marketing companies?  Have a look and try to remove yourself from the bubble because I know it can be exciting when they’re promising huge returns.  And start to look at the fundamentals.  Even when the property market does go [0:20:50], are the fundamentals there for this to be a good investment in the long term?  Like the UK market, it’s a very secure legal system on the supply of property.  All the fundamentals are there and will always be there because these things can be corrected quickly.

It’s not to say as Rob said, never buy abroad.  There are some places where there are opportunities.  Apparently this place is in America.  I don’t know.

The other thing to be cautious of, if a company is selling several different countries and they sell UK, they sell Spain, they sell Cape Verde, they sell USA.  Are they experts in all of these countries that they’re advising you on or are they experts at selling them? Something to think about.  It’s something that always worries me.  A lot of companies will sell several countries.  I’m not so sure they can be an expert in all of them.

Rob D: Very good point.  That’s a common theme in the first three things that we talked about is the marketing and the importance of going beyond that and looking at the incentives and doing your own research.

But the fourth one is something a little bit different.  Number four is buying bargain properties in [0:21:51] in areas that don’t have any rental demand.  This is something that you get in the UK.  And I actually did some digging through an auction catalogue to find an example of this.

An example of I found was a two bed terrace house in [0:22:06] in Accrington.  That was auctioned for £18,000.  £18,000 for a two-bedroom house, amazing.  Then I was looking at the LHA rate, the rate that you get paid by the council if you have someone who is on housing benefit.  The rate for two-bedroom house or two bedroom property is £90 a week.  £90 a week equals £4,680 a year.  I got this written down not from the top of the head sadly.  That is a 26 percent gross yield.  That is amazing.  You buy a house for £18,000.  You get 26 percent gross yield.

Looks great.  However if you dig a little bit deeper into where this property is – I’ve got nothing against Accrington at all. But I did some research and in this area of Accrington.  7 percent of homes are empty.  And that is a huge number considering UK as whole as supposed to be overpopulated and have housing crisis.  Also, 22 percent of the shops in Accrington are empty which is one of the highest vacancy rates in the country.

What that tells you, it might not be as easy to find a tenant as you think.  Although your gross yield is 26 percent on paper, if you can’t find a tenant your yield is zero.  I think really this is something where greed could easily get the better of you if you’re really going for, “Where am I going to buy really cheap but really something making my money go as far as it possibly can?”  Or it could just be naivety if you’re investing on paper too much and getting too caught up in your spreadsheet and not thinking of the realities of it and importance as we talked about before of looking at the fundamentals of an area and seeing if anyone actually wants to live there and if there’s going to be demand, if it’s going to be sustainable.

That’s something to be very cautious of.  You can’t forget rental demand.  When we say no one should buy a property like that, if you’re sophisticated investor and you’ve got a lot of local knowledge and you know that you can make it work and you got a system for doing this kind of thing, that’s great.   But 99 percent of people won’t have that.  This is something that you should be very, very cautious of unless you’re going with eyes wide open.

Rob B: But you realize Rob we’ve lost a lot of listeners in Accrington now.

Rob D: I did say I don’t have anything against them.  Just the fact.

Rob B: You’re spot on.  We put this list together and I completely agree. There are areas that I could talk for our investors where the returns will be higher potentially based on what you’ve gone through.  But if you get a bargain in the middle of nowhere, then all the fundamentals there, the things we talked about before, transport links, investments, shops, schools, jobs, are they all there?  If the answer is no, then as attractive as the return may be, stay away.  Don’t let the greed monster who sits on your shoulder go, “But 26 percent yield?”  That monster gets too big and makes too much noise because yeah, it certainly turns your heat at 26 percent yield.

But as Rob says, if you’re not going to let it out and it’s empty and it never goes up in value then what’s the point?  It’s not a good investment.  Definitely a big lesson to be learned, definitely one that you should take on board and I think it’s important one to have on the list.

Rob D: Yeah.  Another thing I should have mentioned is you’re not going to be able to get lending on that either.  So, you’re not going to be able to benefit from leverage that cheap.  But that’s the least of your problems if you’ve got a property at where I was living in.

Okay, let’s get moving on to the final one, number five.  The type of property investment you should avoid, anything intensive if you’re busy, a bit of [0:25:22] this one.  But the point that I’m making with this is buy to sell strategy is the real kind of property ladder stuff.  It might not be the best strategy for you.  If you got a job that keeps you occupied every day or you have to go in early, work late, whatever.  The same applies in buy to let.  You hear a lot about HMOs.  HMOs can generate a lot of cash but there are a lot of work.  And you’ve struggled in many areas to find anyone who manage those for you because it’s so much work which means you’re going to have to self manage.  Fair enough if you get a couple of them and they’re throwing enough cash.  Then you might be actually chuck in your job and just manage them full time.

But it is very much creating a job for yourself rather than an investment.  Away from the HMO market, even if you’re just looking at single family LHA market, you might have to self manage that if you can’t find an agent. It’s very difficult often to find agents who are capable with dealing with that kind of market effectively and they’re willing to do it.  So that means it might be called a hands on investment for you.

Again, another warning about not getting too caught up in the spreadsheet, going beyond the numbers and thinking about what the investment’s going to involve actually in terms of [0:26:34] from you.  If you’re busy with work or if you’ve got family commitments or whatever, you might be willing to go for a property that’s fully managed where you can get tenants who aren’t going to need a lot of involvement from you.  And maybe a relatively new property where it’s not going to need a lot of maintenance over the next few years.

You can easily get sucked up in the kind of returns that you can make and things are going to be amazing.  But then the reality hits and it’s taking a lot of your time and you’re not able to deal with it as you thought.

Very different from the others but anything too time intensive is something to be avoided if you’re not honestly willing to put in the work for that involves.

Rob B: It can be attractive.  HMOs, great returns.  But there’s a reason why it has great returns because it usually requires more effort.  Now, the majority of people I speak with at RMP Property are busy successful people. But the word “busy” is there.  That means they haven’t got time to do these types of things only this week and this happens all the time.

An investor said to me to do HMOs.  I said, “Are you busy?”  He says, “Extremely, I never have a minute in a day.”  I said, “Are you sure you want to do HMOs? I can understand why.  It’s attractive to returns but are you willing to possibly put more time than say a normal buy to let property?”  He’s like, “No.”

He already knew the answer.  He just probably needed somebody else to say it to him.  He pretty much came around straight away.  He dropped the idea pretty quickly.  But I can understand why people go down that route because it can attractive, the returns.  But be honest with yourself.  Are you prepared to put more time in?  if you are and if you have that time, fantastic.  But if you’re a busy person, that’s not a viable option for you.  It’s not a good investment.  It’s something to be aware of and I think it’s a good one to have in the list.

Rob D: Wrapping up.  There are investments that we think you should definitely avoid but there might be a lot more types of investments that you should avoid depending on your situation.

Then the other thing that came through there was marketing.  You need to look very carefully at the claims anyone is making and do your own research.  I think by listening to this podcast, you’re doing the right thing because whatever you decide to do, you’re going to know to ask the right questions.  So, even if you’re going to be working with a company who does everything for you, you know what to ask upfront to make sure that their claims can stand up to scrutiny and they’re going to do what they’re meant to do.

I don’t think there’s any such thing as a truly hands off property because at the very least you need to make sure that everything’s at it should be.  And so, well done for listening to this podcast because that’s at the very minimum what you should be doing to make sure you know what’s going on.

Rob B: I think Rob’s really nailed it.  The list is bigger.  This is not to be negative at this episode.  It’s just there are people in the industry who are fine and upstanding individuals who will help investors make a big difference in their lives.

But unfortunately, industry where money is involved sometimes it will attract the wrong crowd and the wrong people.  It’s just a word of warning that if you like someone and you want to work with them, I always say to my investors trust what I have to say but validate it.  I tell them to research what I’m telling them.  It may sound dull because they come to me because they listened to the podcast but it don’t end there.  Go research everything I give you to no end because that will give you more confidence.

If someone’s telling you something and then you go and validate it enough for yourself and seeing it’s true, then it’s going to help you build confidence in that person.  That’s not necessarily RMP, that’s whoever you work with, letting agents, investment companies, mortgage brokers, whoever.  Ask questions.  Validate what they’re telling you.  And that will help you get confidence in the company or the individual you’re working with

Rob D: Let’s move on then to our resource of the week.  We can put some of these cautionary notes behind us and move on to an app which we can do nothing but wholeheartedly recommend.  This one came from a listener, Rob.

Rob B: As this is from a listener, can the whole property community get behind Rob Hayward.  Rob got in touch this week via email.  So, thank you Rob.  On the side note, we’ve been getting a lot of emails, both of us recently.  Thank you for getting in touch.  We really do appreciate it.  It’s great to communicate with so many of you and trying to help as many people as possible.

But Rob in particular got in touch this week and a great name by the way.  He’s an app developer.  He’s built an app on the Apple iTunes store.   Of course, we’ll link to it in the show notes.

It’s an app directly related to property, property investments.  It looks at the fast rail end that’s being built across the UK going up to Manchester and maybe further north over time initially [0:30:57] then Manchester and Leeds.  This is going to have a positive effect for a lot of people on the property market.  However, it will at least temporarily have a negative effect for some people too because the proposed routes if there’s people who live there now, that’s causing a negative on the property market because people are uncertain at what’s going to happen.

So, this app is great because it shows you the areas that are affected.  It has a map that you can plug in straight into it and find out exactly where these areas are.  So, if you’re investing, you may possibly want to avoid these areas in the short term.  You may not, you may see it as an opportunity that the prices have gone down a bit and you think they’re recover once the lines are built.  Who knows?  But this app will help you find it.

So, thank you so much for Rob Hayward for getting in touch and passing this app over.  I hope a lot of our listeners go and download it.

Rob D: I have not the chance to download it but the screenshots that we’re going to link to look fantastic.  The interface looks really, really great.  Thank you for that.  Do go and check it out.  We’re always very happy to pimp anything that our listeners send us if it’s relevant to property investment.  Very happy to help.

Next week Rob, we’re going to be talking the six biggest myths about property investments.

Rob B: We’ll keep it mysterious.  You don’t know what they are yet.  But we’re going to look at common misbelieves.  People often say things about property investment and they don’t always hold true.  Sometimes it’s almost believed to be true because so many people say it.  But we’re going to be myth busters.  We’re going to look at some of the myths and say actually that it’s not true and out you on the right direction.  We’re going to tackle a few things that are misconstrued in the industry that people often say true which aren’t.  We’re going to look at six myths about property investments.

So please get in touch for that one.  And also, get in the mailing list because that’s really, really picked up.  This month’s been a record month for us.  A lot of people have subscribed and so thank you so much for doing so.   You as subscribers find out about the podcast first when it goes live; you find out about things we’re doing first.  Thank you for loyally signing up to that list.  We’ll continue to keep you informed.  And of course, no spam.

Rob D: Of course.  And check out our website while you’re at it thepropertypodcast.com which we’ve given a nice overhaul and it’s looking very shiny indeed and that’s where you can drop us an email as well if you want to get in touch with either of us.

Rob B: Talking about overhauls Rob, we got our outro.

Rob D: Let’s hear it.

Rob B: Bye, bye everyone.

Rob D: Thanks for listening to the property podcast. Make sure you join our mailing list at thepropertypodcast.com

Rob B: And remember, we love five star reviews.  Rob even loves them more than air miles.