You may have seen investments where you can contribute a lump sum and then a professional team of investors invest your money in residential or commercial property. They wait for the recovery and pay out expected 15% growth on your money in 5 years.
Sounds really easy doesn’t it? No hassle of finding deals, no getting approved for a mortgage, no dealing with tenants etc. Well let me give you a word of warning about these sort of funds.
- No gearing – the returns you can get from £10k invested in a property yourself and £10k in with a fund is a lot less. These funds rarely borrow so an increase in the market by 15% means you make £1,500 on your £10k. Not very exciting is it.
- Fees! – These funds do not do this out of the goodness of their hearts. They charge you fees for risking your money. This is how they make their money. They get rewarded whether they perform or not. Expect to pay 5% every year. If they make no money in 10 years your capital would be halved.
- Exeprience – Does the team have great experience in buy to let or are they jumping on the band wagon. Now there are some where they do have experience but most are seeing buy to let as an opportunity (well spotted you guys!) and then attempting to cream off other people’s money (another good idea but why not use the banks!).
So if you want to get in to buy to let and want to make small uncertain returns then consider a fund. In all other circumstances get off your armchair and start investing. I do not mean to be rude but you know what I mean. Lets get out there and bag some bargains!
Want a bargain? TALK TO ME!
Ajay
Posted on: 22nd Jan 2010
del.icio.us
digg
Furl
Facebook
Reddit
Yahoo
Spurl
Smarking
Simpy
Stumbleupon
