I’m often struck by the way many property deals are carried out in the UK, with decisions made on gut feel or intuition due to lack of information or transparency on what the deal really is. This approach continues to erode credibility and trust in the property investment industry.
Technological advancements are offering opportunities to make extensive improvements to the property investment industry. And investors and sourcers are likely to demand improvements moving forward.
As many people invest in property to use their savings more effectively whether building nest eggs, funding retirements, supporting university degrees and financing holidays, it’s important for the sector to have more transparency, credibility and trust, so people can invest with more knowledge and confidence.
Transparency often drives property investment decisions, so naturally, a lack of transparency can discourage people to invest. Transparency is also a key factor of international attractiveness of property markets.
According to the 2018 Global Real Estate Transparency Index by JLL and LaSalle Investment Management, the 10 countries named “highly transparent” by the 2016 index now make up 75% of global investment in commercial real estate. The UK, Australia and the US are home to the most transparent property markets; however, more progress still needs to be made.
Behind the numbers
Yields, return on investment (ROI) and return on capital employed (ROCE) continue to be key motivations for investment decisions, making it even more important this area of property investment has more transparency. Each individual sourcer, investor and training company are using their own deal analysers and calculating the yields, ROI and ROCE differently.
It’s hard to find out how these indicators are actually being calculated. It would be much simpler if there was only one way for the indicators, such as ROI and ROCE, to be calculated. This would bring more transparency, so investors can understand what is behind the numbers and accurately analyse and compare different opportunities.
The power of transparency can help investors and sourcers make more informed decisions. And this can lead to people having more confidence in the property investment industry. If everyone is on the same page, everyone can look at deals with trust and confidence.
In the property investment industry, it’s important to work with credible professionals. However, it can be difficult to know which sourcers and investors will be reliable. A few years ago, the consumer group, Which?, revealed there were unregulated property schemes misleading investors in the UK. Many top investment companies were even found to be hiding certain risks involved in property investments.
Additionally, the Financial Conduct Authority recently uncovered there are firms exploiting their trusted regulated status by promoting unregulated investments. An example of an unregulated investment that turned investors into financial victims included buying shares in a company that builds hotels and properties on unused land.
In this particular instance, over 170 people lost £2.8m after buying shares in a business that said it owned developed land on the island of Madeira. The company was fraudulent and lied about having backing from a top British bank and a major hotel chain.
Many deals are being offered through social media platforms and groups, but it can be difficult to know who to trust. Finding good investment opportunities is all about understanding the risks and finding people you can trust with your money.
Mutually trusting partnerships are vital within the property investment industry, as it’s important for people to have confidence in the deals they’re doing. Having more transparency and credibility in the property investment industry will lead to more people having trust in the sector.
Transparency is the first step to building credibility and trust
At PropertyMenu we’re building an online platform and bringing together a community of property investors and sourcers that will bring increased transparency to property investment deals.
Each investor and sourcer is checked, reviewed and assessed against certain criteria, offering a new level of transparency on the people or organisations involved in each deal. The platform then matches potential investors with property sourcers, so that everyone can achieve better returns. Additionally, the platform presents and calculates deals consistently based on a tried and tested deal calculator, providing transparency to the numbers. Investors should have full clarity of each potential opportunity, so they can make informed decisions.
We believe this brings a standard of transparency never seen before to the property investment industry and is the first step to establishing a new level of credibility and trust. PropertyMenu is reinventing the property investment market, allowing more people to use their savings more effectively and with a new level of transparency, credibility and trust.
I’d love to hear your thoughts and experiences regarding transparency in the industry. In the meantime, if you want to check out what we’re doing at PropertyMenu, click here.