Are you looking to invest in a property investment scheme? Be careful, be very careful …

I don’t dabble in property investment myself, and my business deals with what you need to do after you have bought the property and rented it out to tenants.

However, I cannot help but be aware that there is a whole industry dealing with property investment and countless investment advisers all eagerly waiting to help you invest your money (subject, of course, to part of it going to them).

There are also unnumbered property investment trainers, all keen to tell you how to make your fortune with property and anxious to sell you their, incredibly expensive, training to put you on the path to riches.

Some of this training may work, I don’t know I have never done any of it. I personally prefer to stick to what I know and do well.

I have though been given to understand that many of these courses actually exist to promote the trainer’s investment scheme, involving even more payment out of large sums of money to people you may not know very well.

You can probably tell from the tone of my writing where this article is going. I have always had grave reservations about this sort of thing.

Caveat emptor

Although I am not a Latin scholar (my school did Latin, but I never got much further than ‘mensa = a table’), I do understand caveat emptor. Caveat emptor means ‘let the buyer beware’, and the fact that we are still using this ancient Latin phrase today tells us that unreliable salespeople have been with us for a very long time.

And I strongly suspect that there may be quite a few of them in the property investment sector.

After all, if someone really is a property millionaire, why would they want to spend so much time in hotel conference rooms, teaching newbie would-be property investors how to do it? Wouldn’t they rather be sipping a pina colada on a beach somewhere?

Could it be that (whisper it) their money comes not from their actual property investments but from selling their so-called secrets to said, newbie investors?

Crash and burn

I have been prompted to write this article by a thread I spotted on Property Tribes about some well-known property investors who it seems are in financial difficulties.

Their financial supporters are, not surprisingly, anxious about their investments which look as if they could be about to take a deep dive down the toilet.

Then there was another shocking case, reported on the BBC here of a soldier who invested £13,000 or so in one of these schemes and then committed suicide when he lost his money.

And I can remember reading in 2014 about people who had invested their inheritance in buy-to-let property in Detroit, USA. When someone actually visited the properties, they were horrified to find them empty with packs of dogs living in them. Needless to say, the investments did not pay off.

Vanessa Warwick (Property Tribes co-founder) bless her, has been trying to warn people about dodgy investment schemes and training for years.  She is now being sued by one of the trainers as a result of this – you can read about this here (and support her case).

Some free investment training

Now I don’t claim to be an expert in property investment (and indeed am not a property investor) but I have been in the property world for many years as a legal adviser.

So here is my, totally free, advice if you want to dabble in property investment.

• Work out exactly what your financial situation is – how much you need to survive and how much you can afford to invest
• Decide what sort of property you want to invest in – for example, do you want to rent to students, or to families? They are very different markets.
• Decide where you want to invest. The property market is different in different parts of the country and to rent there successfully, you need to know about local conditions
• Do masses of research both in the area you want to invest in and the type of market you are aiming at. This is essential. It could take you a year or more.  A two-day course in a hotel room is not really going to cut it.
• Join a landlords association and go along to the meetings. You will meet other landlords there, successful landlords (who probably won’t be at expensive investment training events) and pick their brains. The NRLA have regional meetings, which I think have started up again.
• Do some training on how to manage your property when you have bought it (my Landlord Law service can help here). If you get things wrong, it can cost you a lot of money in fines, and penalty payments. And, of course, tenant default if you don’t take care over who you rent to.
• And remember that if something appears too good to be true – it probably is.

The rent-to-rent myth

Most of the millionnaire property investment training tends to be around ‘rent to rent’

This is where someone rents a property – not to live in themselves, but to sublet to tenants. You earn your fortune from the difference between the rent you pay and the rent you earn.

Properly done, this can be remunerative. However, you need to be VERY careful.

The normal advice from investor trainers is to split rented properties up and sublet as an HMO. However, the HMO regime is heavily regulated and fines for non-compliance can be massive. Not to mention the right for tenants to claim for rent repayment orders (which can be for up to 12 months rent) in the First Tier Tribunal if landlords get anything wrong. Like, for example, failing to apply for an HMO license when one is required.

If you are seriously considering taking this route to fortune, please watch first the video you will find here, which is of a talk given by solicitor David Smith at our Landlord Law Conference in 2018.  If you still want to do ‘rent to rent’ we have a (reasonably priced) course and tenancy agreement you can buy here.

And finally

The property investment scene is a bit of a ‘wild west’ with unregulated trainers offering an easy path to property fortunes. However, it is very rare that fortunes can be made without effort and you should be very careful about paying over huge sums of money to people who promise this.

There is plenty of less expensive but very good guidance available from organisations such as mine, the various landlord associations (eg the NRLA) and responsible sites such as Property Tribes.  Much of it for free.

The path they point towards property investment success is less glamorous but a lot more reliable. So be wary of the siren calls leading you towards property millions without effort.