I saw an article on Estate Agent Today web site about the rise of “sell house quick” type web sites. I had just been thinking the same the day before. This type of investor house buying system was rife in the boom when anyone could do a ‘no money down’ style mortgage, and promises to buy or sell houses fast were everywhere. Competition for deals was fierce.
The Buy/ Sell House Quick Systems
The system around buying direct from vendors revolves around companies offering to buy distressed sellers homes in a very short timescale (anything from 24 hours to 7 days) by railroading them into making a fast decision. Offers that are quoted upfront are often reduced at the last minute thereby forcing owners who are in dire straights to make bad decisions. People who call themselves ‘property educators’ (many of whom used to be called property portfolio builders), of which there were hundreds teaching newbies how to be rich through property, have dwindled during the downturn. However, those that remain are still teaching some rather questionable tactics, such as sale and rent back and lease options, to obtain property from distressed sellers who are often facing repossession.
There are some good things being taught too, such as the use of multiple joint venture partners which can be used to cover your purchasing and refurbishing fees, or making sure you negotiate deals that are over 30% below any current perceived market value so that you can build in a margin should the market drop more in future.
Ra Ra Advice
Its all very well listening to super positive advice and how to use NLP techniques on unwary vendors, or how to use the various strategies to buy houses quickly, but what many ‘educators’ don’t teach is what situation this will leave the investor or vendor in as regards to tax, or what to do if regulation hits lease options ( as it did sale and rent back). Sale and rent back was all but killed off with FSA regulation because the deals simply did not stack and vendors were often left in precarious situations. It’s all about chasing the deal. It seems nothing has been learned from the financial crisis.
Many of the ‘new’ methods are really rehashes of the good old no money down method which got so many into so much trouble.
Bankruptcies & Escapes
Quite a few of the ex property educators who used to run courses or purely sell deals have gone bankrupt. Some have even resurrected themselves in the same format under their partners’ company ,whilst others have hopped it abroad then come back and reinvented themselves. All left a wake of investors losing thousands of pounds as they merrily claimed bankruptcy. Many of these ex bankrupts and escapees are now stalking social media sites to recruit people into their ways of doing business. ( Because social media is seen as the next big thing in marketing, and what these guys are really good at, is marketing.) Some even set up their own ‘debt advice’ sites so that they can gain leads from desperate sellers, which is smart, but also a bit distasteful. Plenty of those sites have disappeared too.
At the end of the day, buying property just for the sake of it, without proper due diligence, an exit strategy, some ethics and sound tax advice could see your business come crashing down later. There are still lenders who will work with experienced investors. Now is not the time to dabble in the property market with questionable practices which could come back to haunt you later when the market is finally allowed to drop and interest rates rise.