Why I don't like long leasebacks, investment funds, hotel pods and other collective investments
Hey guys,
The reason is simple, I am a control freak. If I can't control my investment totally myself, then it's not a good investment.
Here's a quick cautionary tale.
I have a Aussie mate, Kylie, who invested in a property with her parents. She saved up most of the deposit on a house and, thinking she was doing the right thing, asked her parents to help out with the remaining deposit. Her parents agreed as they wanted to do something for their retirement as well as help her out. They put up half the money to buy the house.
Things were great until about 3 years later once she realised that the house had gone up about $100,000 (Australian), which is about £40,000. So she thought Great! I'll remortgage and take out the excess to invest further. A great plan -- but when she ran it past her parents, they were totally against it. They believed she should pay the mortgage to zero and look after her retirement. After all, that's how they had done it.
She was stuck between a rock and a very hard place. Her parents wouldn't listen and she had all this equity that she couldn't use.
Her mistake was that she had given away control and invested with people with different beliefs and a different stage of life.
I always remember one of my parents' buy to let properties going sour because the friend they had bought the property with unfortunately decided he wanted to sell right before the property market went boom.
So back to the topic at hand. I don't like long leasebacks or collective investments, etc., because just like Kylie who could couldn't access the equity; you will have problems getting equity back out of some of the long leaseback schemes. It's the same with a lot of these types of investments.
<
I like direct property ownership of standard (or more importantly, mortgageable) property. This way when it has equity in it I can access as soon as I need to without too much fuss and more importantly, without using mortgage products that make me cringe with the over the top interest rates. This freedom allows me to build my portfolio.
It's also one of the reasons that I don't like some overseas countries. Even though they have good capital growth, you cannot access this growth unless you sell and that sort of defeats the purpose of investing. I am a hoarder. I like keeping my properties and I like being able to go back to them time and time again and get more and more money out of them as I need to.
So before you buy long leasebacks, hotel pods, collective investments, funds or other investments of this type, simply ask yourself this question:
"Once this goes up, how will I access my money?"
If you are happy with the answer then invest away!
Live with passion,
Brett Wood
PS. It wasn't all bad news for Kylie. She ended up getting a job in Melbourne and therefore had to sell the house and move down there thereby realising the capital. See: there's always a way around things but naturally now the house is now worth about 3 times what she sold it for.
PPS. If you are not exactly sure what I mean by any of these investments then give us a call and we can explain each to you.