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Using property portfolio building companies

In times where we don't have a lot of personal time to spend on ourselves, it seems that some companies are taking advantage of this and offering services to "invest in property" on your behalf. Fair play to them - BUT ...

Would you trust someone to do your food shopping for you? They may pick bruised apples, the bread that has only 2 days left on the best before, and they may not pack it fast enough to keep it frozen for you, causing it to thaw and re-freeze.

Imagine applying that trust to a company that you pay £25,000 to! So many people "risk" their life savings and hard earned cash, based on some gut feeling that they think what they are doing is right. They are too trusting, and a lot of them are paying for it now.

Being an avid reader and poster on discussion forums I have noticed a lot of people having quite bad experiences with some of these portfolio companies, and I would like to share some of the pitfalls with you.

Not every company is bad, or out to get you, but you must remember that these people are in this to make money for them, and they are using your lack of time, you lack of experience, lack of knowledge of an area and finally your trust and your money to make themselves very rich.

Lets look at what they offer you:

Build a portfolio to make you a millionaire

High Yields

Little or no work

Maintenance package

Instant finance facilities

Seriously, what could sound more easy? Pay your money and leave it to them.

Well investing your money yourself may take a little bit of extra time, but at least you would have control of what was going on.

Some investors pay their money out, expecting to have a property refurbished and rented out within a few months, but 6 months down the line they are still waiting. In the mean time some of these portfolio companies are quite likely to be using your cash for something else.

What some of them offer:

Source and refurbish property.

Source and refurbish and let and manage property.

Sell you property they have refurbished already.

Sell you stock and let it for you.

Sell you property with rental guarantees.

Some of these offerings are not quite what they seem, especially rental guarantees. One investor I know was receiving rent for 6 months, and one day while she was in the area she decided to do a drive by on her property. It was boarded up! The company she was dealing with have gone bust now, and she is left with a boarded up property, paying a mortgage.

What to do to protect yourself:

• Search on internet discussion forums, people talk openly about the experiences they have with companies, they don't want those companies to have any more investors money, as they know the stress that they had, so they help you out by telling you who to steer clear of, and who may actually do what they say they will.
• Visit the area, buy local papers and speak to local letting agents - make sure that the area you are trusting these people to supply you property has a high demand - think about it, if they are buying for you, they will be buying for others too, and there may be an oversupply of property in the area.
• Set out a specific timeframe, draw up a contract, and if they don't meet it - get your money back out.
• Go and build your own portfolio - you only have yourself to blame if it goes wrong whether you do it their way or yours.
• Network with other investors, there are regular meetings around the UK for property investors, you can usually find the dates for these on property discussion forums, they are free, and people will share their experiences with you.
• Get references from other property investors, if you can - but be careful they could be planted.
• Find out how long some of these companies have been going for - a lot of the newer companies are run by young enthusiasts who went on a seminar last year and saw a demand and are now claiming to be property professionals, they often do not understand the impact of what they are offering as they are not experienced.
• Check to see if the company are offering you "stock" that they buy in, do up and sell on to you, if it is, check for rental demand before you buy, ignore any rental guarantees as most of them are not enforceable.

Some companies may offer you a portfolio that is ready made, give you a list for you to do a drive by - find out WHO OWNS it - there are some companies that are selling stuff that they have not even secured ownership of, and you may be wasting your time. You can check with land registry online for a couple of pounds to see who the owner is.

Just one final point to consider - it may be quicker for you to use these companies, but it will not save you time in the long run if you get caught out.

It is possible to start to build a portfolio in 3 days - if you can't take 3 days out of your busy schedule to invest your money, maybe you should not be investing.

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