Buy To Let Investors - Beware That All That Glitters Is Not Gold

NOVICE buy-to-let investors are being targeted by a new wave of ‘creative financing’ schemes, a lettings specialist has warned.

Belvoir, based in Marsh Road, Luton, warns that that there could be potentially dangerous consequences.

Belvoir’s Adrian Mason says advertisements and seminars enticing people to look at ways to buy a property for rental, without the need for a cash deposit, need to be viewed with extreme caution and not even contemplated without some basic research and checks.

Mr Mason, who runs the office, said: “Because property investment in buy-to-let is unregulated in the UK, the Latin phrase ‘caveat emptor’ – ‘Let the Buyer Beware’ is a very clear warning to anyone wanting to explore the current wave of popularity in buy to let investment.

“Many of the zero-deposit property buying clubs and groups which grew rapidly and then disappeared during the housing market slowdown in 2008 are creeping back, and some of them have no morals.

“A substantial number went into receivership, with their directors fleeing overseas to avoid claims and litigation – leaving a trail of disaster behind them.”

Such operators made large margins by claiming to source below market value (BMV) properties, promising big financial returns for investor landlords.

But the properties were often over-priced, and the operators charged hefty fees for their services at the time of making an offer and on completion of purchase.

Many investors took out no-deposit, over-inflated interest only mortgages, but then failed to achieve the rental returns promised, leaving them with a substantial shortfall.

These novice investor landlords then struggled to re-mortgage as the property was worth less than between 25 and 50 per cent of the inflated purchase price.

As a direct result thousands had their properties repossessed between 2008 and 2010.

“Mortgage deals which do not require a deposit and can only be achieved by creative ‘over inflation’ of the property price could well be close to mortgage fraud,” added Mr Mason.

“Some of these operators even suggested using credit card payments as a deposit, which is a totally irresponsible thing to do,” he added.

Belvoir urges new, and inexperienced, investor landlords to carry out detailed checks before being lured into these schemes.

Mr Mason added: “How much better is it to ask for impartial advice from an independent and professional property lettings agency, which can help compare deals and offer free advice without sale or introduction fees?

“As a local business, with very high standards to maintain, we are not in the property market for short term, selfish motives. We want investors to succeed and not get drawn into a deal they will live to regret,” he added.

Dorian Gonsalves, MD of Belvoir, said: “It’s the old adage, if a deal sounds too good to be true, it usually is.”

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