8:54 AM, 16th September 2024, About 2 months ago
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As a new or inexperienced investor, it’s crucial to avoid certain types of properties that may seem appealing at first glance but could present significant risks. Here are ten types of properties you might want to steer clear of to ensure your first investment is solid, sound, and secure.
Non-standard construction refers to houses built with materials that fall outside the norm, such as concrete blocks or wooden frames, rather than the typical brick or stone with slate or tile roofs. These properties can be harder to finance, as mortgage lenders and insurers often hesitate with non-standard construction, which can also impact resale value.
Subsidence occurs when the ground beneath a property sinks, causing the foundation to shift. Even if subsidence issues are fixed, the property’s history can make it less attractive to buyers, mortgage lenders, and insurers, potentially affecting its long-term value and marketability.
While low prices can be tempting, properties in undesirable areas often attract tenants who may not reliably pay rent or take care of the property. This can lead to increased costs and management headaches, potentially turning what seemed like a good deal into a problematic investment.
Listed buildings are on a national register due to their historical or architectural significance, which places restrictions on what changes can be made. Any alterations usually require special permissions, adding complexity and cost to property management. These properties may not be ideal for first-time investors due to the additional regulations and maintenance responsibilities.
These purpose-built student accommodations might seem attractive due to marketing promises of hands-off management and high yields. However, their narrow tenant base (students only) can lead to high vacancy rates, especially if local universities face challenges. Additionally, these properties often see minimal capital appreciation and have limited resale appeal.
Investing in hotel rooms shares many of the same risks as student pods, including a narrow market for resale and dependency on a specific business model. As with student pods, guaranteed initial returns may not last, and future income can be uncertain.
Properties with walkthrough bathrooms (bathrooms situated such that they are only accessible by passing through a bedroom) are generally less desirable to tenants. This layout often leads to extended vacancy periods, making these properties hard to let and even harder to sell.
Any property that doesn’t generate positive cash flow should be avoided by new investors. Negative cash flow means you’re spending more on the property than you earn from it, which can quickly drain your resources.
Leasehold properties, particularly those with less than 125 years on the lease, can come with challenges such as high ground rent and service charges. For new investors, it’s often advisable to look for leases longer than 150 years and to thoroughly check the lease terms.
Investing in areas with low rental demand, such as those lacking schools, employers, or transport links, can be risky. It’s essential to research the local market to ensure there is sufficient demand to support your investment.
While some investors can make these types of properties work, they often require a level of experience and risk tolerance that may not be suitable for those just starting out. As a new investor, focusing on safe, stable, and straightforward investments will set you on the path to success.
If you are keen to get started investing in property but you don`t know what to do, what to watch out for or even where to start why not sign up to the Buy To Let Blueprint – Becoming An Investor Online Course where you`ll gain the expertise to purchase a safe and profitable investment property.
To get started you can sign up by clicking here
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