Property Get-Rich-Quick Schemes Risky – It has emerged that many investors have been seduced by the lure of financial gain and investing a great deal of their hard-earned cash in dilapidated properties in the US and student accomodation in the UK. UK citizens, disenchanted with low savings rates have been encouraged to invest thousands into properties they’ve never seen and will likely never visit.
The Con
The schemes generally involve the buying of a house which can be at once let out to tenants. The trouble is that the real property boom happened in in 2004 so you could well be buying a half-built flat or a subsiding house worth a fraction of what you’re paying for it. Detroit for instance has seen a 50% decrease in property value compared with 5 years ago. The organizations buy such properties for less than a few thousand dollars, then selling them to British investors for a large profit.
Worthless
They encourage investors to buy a three bedroom house for around £25-35 thousand which is supposedly guaranteed tenancy and thus an income of at least £500 per month. This rent is guaranteed by the fact that local authority supposedly covers it. Buy to let investors are being warned that such investments can, unless properly checked, turn out to be worthless and it is doubtful that overseas property insurance will cover you.
Student Lets
In the UK there have been similar schemes, specifically the selling of student one-bedroom flats in University towns. These can be purchased for £15-45,000 and investors are told that they can expect rents of up to £1000 per month but are responsible for finding the tenants and must pay an annual management fee of £1000. Concern has been expressed however at whether such student rooms can be filled, what with an empty-room crisis happening around UK Universities due to the increase in tuition fees There is also the possibility therefore that rent-income is in actual fact substantially lower than advertised.
At any rate you should always make sure you do your research and carry out the necessary legal background checks.