Why is every city centre new build apartment always.....INVESTMENT PURPOSES ONLY?

user1977

I've had a quick look through a few in Birmingham and can't see any which are investment only. 

theoretica

I've seen announcements of local development projects which will include a fair number of rental only homes, many of them 'affordable housing'. I haven't noticed these flats for sale as individual investment properties though.

But as above, mortgage payments don't include service charges, maintenance, redecorating which rent does - and often furnishing too.

eddddy

IAMIAM said:

Why is every city centre new build apartment always.....INVESTMENT PURPOSES ONLY?

The adverts are often for a risky unregulated 'investment scheme' - rather than for buying a flat.


In some cases, the investment scheme works like this:

• A bloke who was selling used cars last week decides to call himself a developer

• The bloke has no money, but he gets an option to buy a piece of development land (or disused building to convert)

• He advertises on Rightmove - the deal is that if you invest £250k, you'll get a flat worth £300k

• He gets 20 investors each paying £250k in instalments = so he now has £5m coming in

• He uses £1m (or more) to pay himself and his mates salary, commission etc

• He uses the remaining £4m (or less) to buy the land/building and build/convert 20 flats

• Each investor gets their flat but complains it is poorly built, unmortgageble tat - and not worth anything like £300k 
• 
  
• (Or if things go badly, the investment scheme goes bust and the investors lose their £250k)
  

I guess some of the schemes might be less risky than others. But you need to do some serious investigation into the developer, their track record, their financial situation, potential loopholes in the contract etc.  You need to be a sophisticated investor.


(Imagine if the bloke went on Dragons Den with a business plan saying - I've got no money, I've never done a development project, but I want investment totalling £5m for my first development project. The Dragons would fall about laughing. But some 'private investors' still seem to think it's a good idea).