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When things go wrong for developers and investors

When things go wrong for developers and investors!

Although there have been occasional dips in the market over the years, on the whole property prices have been steadily rising in the UK for decades. In the last twenty years, prices in many areas have skyrocketed, something that has tempted many individuals and companies to invest in property. 

However, while putting your money in property can bring fantastic returns, investors need to be careful about who they work with and which schemes they invest in. Putting your money in the wrong place, or working with the wrong people, could leave you seriously out of pocket. Here are just a few examples of what happens when things go wrong. 

Unscrupulous developers 

Not all development partners are reliable and above board. In 2019, investors lost hundreds of thousands of pounds after putting their money into the development of student accommodation. The project had raised £100m from investors in the UK, the Middle East and Asia. These investors were told to expect returns of up to 12% a year. So far however, they haven’t seen any income at all from the development. 

One of the main issues appears to be the glut of private student accommodation now available. In towns like Bradford, Huddersfield and Leicester, there are now more rooms than there are students. This has led to many new developments remaining empty. This project shows the importance of thorough market research. Therefore proving investors should only ever put their money in projects that have been meticulously thought through. 

Construction firm collapses 

If the main contractor on a large project collapses, it can spell disaster for investors. According to Construction News, 36 building companies went into administration in February alone, with another 364 involved in some stage of the liquidation process. 

When construction companies go bust in the middle of a project, investors can lose their money and the build can come to a complete standstill. This is why it is so important to work with trusted, experienced contractors on each and every project. 

Untested investment models 

In Liverpool, a number of developments were launched using a new model that’s rapidly growing in popularity. Rather than going to the bank, these schemes – known as ‘Buyer funded development’ – rely on the deposits of multiple small investors. These deposits can be up to 80% of the value of the unit being purchased. 

Many of these projects were promoted by Government ministers, including former Chancellor George Osborne. However, a large number have now collapsed or stalled indefinitely, with many investors left out of pocket. 

While new investment schemes are always exciting, it’s essential that you properly research how a development will be funded before putting your hand in your pocket. This is especially true when the model is relatively untested. 

If you’re thinking about investing in property, working with a trusted, experienced and reliable partner is the best way to avoid these expensive pitfalls. You can learn more about the projects we’re working on, by contacting us today. 

When things go wrong for developers and investors!