From student pods to buying abroad, here are the investments you should be wary of.
When it comes to buy-to-let, there are very few property types that will be suitable for every landlord.
Factors like cost, condition, size and location will all combine to make a property more attractive to individual investors.
The opposite is also true of course: properties are rarely a bad deal for everyone.
That being said, there are some investments that you should generally think carefully about before jumping in.
Student pods
You buy a room within a purpose-built student block and rent it out to students.
Many will come with a guaranteed rental return for a period of one or two years. What’s not to love?
Well, lots actually. Firstly these pods are almost always overpriced, that guaranteed return you’re getting will have been factored into the asking price.
Secondly, the resale market is virtually non-existent. You can only sell to other investors. And your tenant market is also severely limited.
Finally, there is very little possibility of capital growth. Prices will only rise if yields do.
Hotel rooms
Hotel room investments are similar to student pods.
You buy a hotel room, a management company rents it for you, and you get a return.
It’s a hands-off investment - which can be many attractive to investors.
What’s not so attractive, of course, is the fact these also have a capital growth issue and a distinct lack of a resale market.
What’s more, you’ll be hard-pushed to find a lender willing to lend to you on such an investment.
Overseas ‘hotspots’
I’m certainly not suggesting overseas investments are a bad idea in general. However, you should be wary of areas marketed in a particular way.
We’ve seen what happens when marketers get overexcited.
A few years ago Bulgaria and Spain were the locations which were heading for a boom; prices were going to soar, so investors and developers had to get in quickly.
And now? Prices have plummeted in both countries, and thousands of homes stand empty.
Be cautious around claims of price rises.
Do your own research, don’t focus too much on price, look at yields and, as ever, consider the fundamentals of the area.
'Bargain' properties
It is certainly possible to get a property bargain.
If you’re able to have other points of negotiation, you could get a great deal on a property. But if a property price seems too good to be true, assume that it’s not and do your research.
There’s very little point in buying a family house to rent out - even if you get it for rock bottom price - if nobody wants to rent it!
Check the rental market, the local amenities, the employment opportunities before getting carried away by a bargain.