Negotiation, Negotiation, Negotiation

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Investors Chronicle article – “Property Swindles Exposed” and the need for licencing of landlords

Posted by Mark Harrison on November 9, 2008

The current issue of Investors Chronicle has an excellent article alled Property Swindles Exposed. (You can read an outline of the article at their site here.)

Without wishing to re-post the key findings of the article, the author went along to a series of property seminars, and was horrified by what (s)he found. (I’m assuming that Claer is a she, but I’m honestly not sure.)

However, several of the (justified) complaints about the property seminar industry in the article seem to boil down to some key points. [These aren’t the points the article lists, by the way, but my overview synthesis of what the complaints the article lists have in common. The article is well worth reading, and I’d strongly recommend you go and get a copy of IC to read if in full.]

  • The information provided is basic and aimed at building a dream, rather than actually giving insight
  • The presenters (massively) underplay the risk of a number of strategies
  • Some of the “deals” presented are, frankly, incredibly poor
  • The whole concept of BMV investing relies on exploiting people

To take these one by one.

The information provided is basic and aimed at building a dream, rather than actually giving insight:

I’d agree with that. I’m horrified at what a lot of companies charge for. I’ve seen seminars based around no more content than my “Below Market Value – Parts I-IV” newsletters (where are free starting here!) sold for £500+

The presenters (massively) underplay the risk and effort of a number of strategies:

I’m glad to see other people finally comment on this. Looking back, I first started writing about the risks of property investment back in 2004, and my 2004 CD set talked about the WORK of being a landlord, and tried to dispell the myth of passive income.

Some of the “deals” presented are, frankly, incredibly poor:

Yup. I’d go along with that. I’ve worked with some good finders in the past, but generally people who were sourcing for me on my terms. My worst deals have been through “portfolio companies.” (I’m not saying that they’re all bad, only that I’ve not found one I’ve been able to work with for more than a single transaction!)

The whole concept of BMV investing relies on exploiting people:

I’m not denying that this happens. However, I’ve also seen examples of times when landlords buying to rent-back have worked strongly in favour of people who otherwise were on the brink of homelessness. The comments the article makes about “I caution would-be investors about how they’d feel about evicting a family which defaulted on a tenancy” is hardly specifially about BMV.

I can see that there is a difference between A: simply letting a property on an AST, and then evicting the tenant because you want to live in the property, or sell it, or refurb it to find a higher-paying tenant, and B: buying someone’s house at a cut-down rate, renting it back for 6 months to them at a cheap rent, and then evicting them because you want market rent.

My complaint about the article in this regard isn’t that I’m denying the problem happens, but that the article is seeming to portray “predatory landlording” as either common, or something that seminar companies teach. In my experience, this isn’t the case, and that most landlords do a professional job.

For this reason, I am in favour of the FSA regulating Sale and Rent Back schemes. In fact, in the light of the Rugg report (about which, more on a future date), I’m not opposed to the licencing of ALL landlords, though I’d rather see “Part P-style” accreditation in which organisations like the NLA, the RLA and (if it’s still independant) the NFRL are able to accredit landlords rather than having another central government department responsible for so-doing… or worse, a different accreditation by each council, so that a landlord with 5 properties in 5 towns (which to be fair, isn’t something I’d recommend) needs to pay 5 sets of accreditation fees.


4 Responses to “Investors Chronicle article – “Property Swindles Exposed” and the need for licencing of landlords”

  1. David Jenkins said

    I read the article, but thought it just rubbished property generally.

    On page 1 of investors chronicle is a two-page advert for some day-trading software that says “£200 voucher for a full day Education Course”.

    Maybe if the property seminar companies spent as much as the day trading companies on adverts, the magazine would be a bit more positive about them.

  2. Telegraph said

    In the most parts of the UK the house prices have dropped almost 15% on average since their peak last year. Some economists predicted this crash back in 2005 and are expecting a further 20% drop. The sale and rent back market has been growing at phenomenal rate due to the rising number of homeowners struggling with their mortgages.

  3. “Some economists predicted this crash back in 2005”.

    Ah – that would be Capital Economics, who made similar crash predictions in 2000,2001,2002,2003 and 2004… one year they were bound to be right 🙂

  4. Yeah I agree Telegraph the SARB market has grown alot. But also a lot of unscrupulous operators have given it a bad name. Some of these property seminars are unethical in certain respects its difficult to find a decent course. However now the sell and rent back market is regualted by the FSA as of July 2009 this will help deter unethical practice. Here’s a list of registed sell and rent back companies for anyone who is interested.
    Sell And Rent Back

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