Property clubs exist to serve the mutual interests of their members but also those who run the club. You'll have to look carefully to see if this is a ‘mutual’ club or something that has been established by a business with the aim of making money from the investors.
These clubs and investor groups will set out to buy property or shares in property for their investors. The services offered by the club will typically include finding the actual property or properties, offering
to their investors, then being able to fund the purchase and thereafter being able to redecorate / remodel (or build - in the case of any off plan purchase) and then let out the property.
The above is a generalisation. There are some clubs out there with a different method of operation see our
recommended property clubs
for a further information.
Every club will have it's own USP (unique selling proposition) where the head honcho will wax lyrical about how good his or her 'property system' is,
how cheap the properties are
and why it's the best way forward. There will be much truth about what they will say, although buying any property has historically over time made money.
Everyone in life will aim to make a profit: most property groups are set up by entrepreneurs who want to do well for themselves and after a while invite their friends in as well. They will have built up enough knowledge to help others become established and then
The recent media interest in certain aspects of buy to let has focused on the excesses of the industry and certain characters behind firms that have clearly managed to earn a huge amount of money which certainly seems unjustified and has resulted in various surveyors being sent to jail for fraudulently inflating the values of properties sold to armchair investors. Whether there has been a blatant rip off in terms of value or there have been a large amount of fees incurred, these costs all have to be wrapped up by borrowing on a mortgage.
If you're looking for good
property investment advice
and assessing whether you have a potentially good deal and the property that you are buying 'stacks up', also remember that there may have been a few other parties involved in the buying process beforehand. This gives the property club the opportunity to either receive a discount in addition to one that could be passed on to the investor.
Valuations are key to assessing whether you have a good deal. The property club's valuer’s may well be working in the mortgage company's interests. Each valuer will have their own opinion. This does not mean to say that they are right or wrong, it simply means that that is their opinion at the time. The local property market may think different and that's why you should get out of your armchair and go and take a look!
If you think that something is good value, then you're probably right. If you think that the deal you're being offered is too good to be true, then it probably is. Somewhere in between these two thoughts lies a balance...
Return from Property Clubs to Investment Property Financing