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Property investment companies: Read this before you work with one

Last updated: 17th April 2019

Property investment companies are everywhere. If you’ve searched for anything to do with UK property investment, you’ll see a big list of adverts from property companies keen to help you build your portfolio.

Should you get in touch, or run a mile? By the end of this article you’ll know:

  • What property investment companies offer
  • The types of company you can work with
  • The pros and cons of working with them
  • What to check before doing business with any property company
  • How to know whether working with an investment company is right for you

What do property investment companies actually do?

Property investment companies aim help you invest in property if you lack the time or expertise to do it yourself.

The scope of their services varies, but you might expect them to:

  • Source suitable properties through their network of contacts
  • Help with the purchase process, liaising with solicitors and mortgage brokers on your behalf
  • Manage the property for you, or connect you with someone who can

The range of services will differ, as does the way they work: some have a “stock” of properties that you can choose from, whereas others “source to order” based on your requirements.

What types of buy-to-let investments do they sell?

Different companies have different specialisms in the type of property investments they source.

Some specialise in properties with long-term capital growth potential, while others focus on investment opportunities offering a high yield.

Some specialise in particular sectors, like student accommodation, HMOs or properties with development potential.

That’s why it’s essential to get clear on your goals before shopping around for an investment company: without knowing what you’re looking for, it’s impossible to know whether you’re talking to the right people.

What are the advantages?

Save time. If you’re presented with potential investment opportunities, it could save you tens of hours of trawling Rightmove, talking to agents and booking in viewings.

Cut down on admin. Companies will often deal with solicitors and brokers on your behalf: and while they can’t take all the paperwork off your hands, they can take on a lot of the legwork.

Avoid making expensive mistakes. If they’re doing their job well, they’ll already have filtered out the many bad investments you could stumble into if you’re inexperienced.

Get a discount. Often, the sourcing company’s connections and bulk buying power will allow them to secure a discount in excess of what you could achieve on your own.

Build your confidence. Investors often work with an investment company for their first couple of purchases to get support and learn how the process works, before branching out on their own.

But, of course, it’s never all advantages…

What are the disadvantages?

It’ll cost you. Obviously, nobody is going to work for free. Their fee will be a cost you wouldn’t have if you did it all yourself, but you need to balance this against the cost of your time.

A limited choice of investments. If you’re looking for something very specific – like a property in a particularly tight area or of a certain type – you might struggle.

You need to have trust in their process. If there’s something wrong with the investment and they miss it, it could cause you big problems.

You miss out on the full hands-on experience – which is part of the appeal for many people, but does limit your learning opportunities if you do have time to spare.

Is buying through a property investment company right for you?

It’d be completely wrong to say that working with a sourcing company is great for everyone, or that it’s always a terrible idea.

Generally, working with a company will suit someone who:

  • Doesn’t have the time to find the same standard of deal on their own, or doesn’t want to. Otherwise, just do it yourself and save the fee!
  • Is comfortable leaving someone else to it, and being hands-off. Just because you’re time-poor doesn’t mean you’re OK with not being in full control. It’s very much a mindset thing.
  • Has the knowledge to assess and verify the information they’re given. You should not buy through a company if you can only blindly trust what they tell you.

This last point is especially important: just because a company is helping you to build a portfolio, it doesn’t mean you can abdicate all responsibility.

There are companies out there who are motivated by commissions to sell less-than-great investments, but even the best company can make mistakes. Their job is to put the investment case together, and your job is to validate everything they tell you.

You should be checking:

1

The price: If they’re claiming it’s discounted, is the discount genuine or was the asking price inflated to start with?

2

The rent: Will it really rent at the level they’re claiming?

3

The location: Is the area popular? Is it on the way up, or the way down? Is there enough tenant demand for this type of property?

If you lack the knowledge to do those things, luckily we’ve got resources like Property Hub University and a huge back-catalogue of podcasts to help you build that knowledge completely free.

What to check before working with a property company

As well as doing your research into the specific investments they offer, you should make sure you’re comfortable with the company too.

The thing most people are concerned about when working with a company is their fee. This is an easy one to assess: just add their fee to the purchase price of the property. If you’re still confident that the total price is a good deal, all good. In other words: wouldn’t you be happy to pay a company a fee of £10,000 if they could genuinely save you £20,000?

(This is the beauty of working with a good investment company: if they get you a discount big enough to cover their fee, you’re effectively getting everything done for free!)

But really, choosing who to work with is about far more than just price. Here are a few “red flags” to look out for:

Do they bother to ask what you’re trying to achieve?

If they immediately start peppering you with investment opportunities as soon as you make contact with them – before they ask about what you want an investment to do for you – that’s a sign they’re more interested in their sales targets than your goals.

Do they put you under pressure to buy?

If it’s such a great opportunity, they should have willing buyers queueing up – so why are they giving you the hard sell? A good company should give you all the information you could possibly need, then give you time to do your own research.

Are they selling the same investments as everyone else?

This is hard to assess until you end up on a few mailing lists, but there are some investment opportunities that everyone seems to be selling.

That doesn’t necessarily make it a bad deal, but they’re seldom the best. It could be that the developer is struggling to sell them (or trying to sell them at too high a price), and getting as many companies as possible to help. At the very least, it suggests that the company is more of a sales operation rather than being skilled at unearthing genuine, unique deals.

The verdict

One of our favourite things about property is how many different paths it gives you towards achieving your goals.

If you prefer the path of being more hands-on – making the most of practical skills, or just for the fun of it – then you’d be mad to pay someone else to do it for you.

On the other hand, if your lack of time would prevent you from making the best buy-to-let investments – or even building your portfolio at all – working with a company makes a lot of sense.

Doing your research on the company – then researching their research when it comes to each potential investment – is essential. And before any of that, you need to be clear on what you want to achieve and which types of investment will help you get there.

That’s why at our property investment company, Property Hub Invest, we refuse to show you any potential investments until we’ve met you and worked with you to determine your goals and strategy.

Book a free strategy meeting, and make the most of all the free education we offer, and you’ll be in a much stronger position to decide whether to work with a company or go it alone.

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