Property recovery funds

With buy-to-let finance harder to obtain these days, investors looking to take advantage of reduced house prices may be tempted by property “recovery” funds
With buy-to-let finance harder to obtain these days, investors looking to take advantage of reduced house prices may be tempted by property “recovery” funds.

What are they? A raft of new funds, many focusing on central London properties, are offering the prospect of double-digit returns and a hassle-free way of profiting from a pick-up in prices.

What’s good? investors’ cash is pooled to build up a portfolio of properties. This should reduce the risk compared with buying a single buy-to-let property. Purchases and lettings are professionally managed for the fund, and investors don’t have the bother of dealing with tenants.

What’s on offer? The Candy & Candy Growth Fund plans to buy properties at £2 million to £10 million each in Mayfair, Chelsea and other “golden postcodes”, let them out for five years, then refurbish and sell. The London Central Residential Recovery Fund, managed by London Central Portfolio (LCP), will acquire one- and two-bedroom flats to rent. RPAM’s Residential Property Recovery Fund will buy distressed property to rent.

What’s the catch? Many of the funds have investment minimums of about £25,000. Charges may also be high: LCP charges two per cent on all properties it buys for the London Central fund, plus a project management fee on refurbishments and 15 per cent on rental income. The funds are unregulated and financial advisers say investors should be wary of projected returns.

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