The black, the white and the grey of purchasing property
The UK property market is changing and as investors we need to change with it.
The market cycles. Lending criteria change. Rates change and legislation changes. The whole market evolves and unless we evolve with it we potentially risk using structures that are now frowned upon, or in the worst case, are now illegal.
The UK property market is maturing a lot faster than the Australian market that I was watching carefully in the 90’s. Frankly, I’m impressed at the rate of change and I think it’s a positive step each time we remove the various loopholes that exist which put investors at risk either because of their own level of education or because they feel that it’s OK to bend the rules.
I always say that the spectrum of structures when purchasing a property runs from the white through the grey and definitely into the black.
The white is how the average uneducated investor buys property. Perfectly legal and perfectly working in everyone’s favour, except theirs.
The black is illegal and although we certainly don’t want to be here, the unfortunate fact is that some investors do end up here when working with inexperienced, unprofessional or downright unethical property clubs. :(
It always pays to remember that property clubs are not regulated in any way so they must conduct themselves by their own code of ethics. If you’re thinking of dealing with a club that doesn’t have them published as prominently as we do, then be sure to ask some serious questions.
The grey is where I like to play. It’s where the highly educated investor plays. It is perfectly legal even though most people would proclaim you can’t do that!. I assure you its perfectly legal and unlike the white the odds are definitely in your favour.
The trouble with operating in the grey is that it changes so often.
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You must keep up to date with the latest changes in the market, lending criteria, and most importantly, the legislation. If you don’t, what was grey when you reserved or exchanged the property can sometimes become black before completion!
This is one of the reasons why I love newly built properties. The grey structure you choose when you reserve is the same structure you complete the property on and as I’ve said many times before here on this blog: I like certainty!
So this brings me to my point: on our website we don’t talk about discounts, cashbacks, rebates, allowances or incentives.
We don’t even talk “structures” or “grey areas”.
We leave these for when you are speaking with our experienced portfolio managers one on one. It’s at that time we can discuss the structure you’re most comfortable with. We are even happy to talk in detail as to why some structures are in the black and what needs to change to move them well into the grey. Often we are splitting hairs but this splitting of hairs can mean the difference between passing the “sleep test” of property or sleep test the inside of a cell. (Ok, I may be exaggerating a bit, but there’s a grain of truth there.)
Keep in mind that more and more, lenders, valuers and regulators are looking at our industry and some of the practices that go on. The last thing you want to do it proceed with a strategy that ends up costing you your investment. While I don’t see this necessarily being a risk for you as an individual, it certainly is a massive risk for companies like ours if we cross the line between grey and black.
It’s just something I am not prepared to do. Not for me, not for my team and certainly not for you!
Happy investing in the white and grey!
Live with passion,
Brett :-)
PS. I said potentially risk above because I have acquaintances in Australia who for many years have run the line between black and grey and have made a lot of money for a long time, and they continue to do it. Funnily enough, I know just as many that have run that line and fallen foul.
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