There is a new breed of property investment in town and it’s causing a stir. Rather than simply owning one holiday home you can own a share of six in fabulous locations around the world. While you profit from the value of the homes rising, you get to enjoy regular holidays in Brazil, Thailand and America. It’s an appealing idea. Not only do you spread your risk by investing in six different markets rather than one, but by investing via one of these clubs you don’t have the burden of maintaining the properties either.
But before you get your chequebook out, let’s look at the catches – and there are one or two. Take Rocksure, which is offering investors a share in its Bravo fund. This will have six properties in places including Brazil and Morocco for £189,000. That doesn’t sound too bad for a share in six holiday homes. The problem is the extras. You also have to pay an annual service charge of around £1,800, which isn’t guaranteed to stay the same each year. So that’s a £189,000 initial investment, a further £1,800 a year, plus the costs of flights, all for four weeks’ holiday a year. Suddenly it’s not looking so cheap after all.
The other problem is that the 39 other families invested in the properties are also entitled to four weeks a year in the houses. That means that you can’t just decide at the last minute to go to Colorado and competition for the school holidays is likely to be fierce.
So what about the investment angle? “It’s boring having shares in Cadbury, where the dividend goes straight to your bank account… with us you’ve got capital appreciation and a visible asset you can have fun with,” says David Rogers, one of Rocksure’s founders. But in these uncertain times a regular dividend is pretty appealing. With Rocksure you don’t get a share of any rental yields on the property, as these are used to cover maintenance costs. You also have to wait until the properties are sold to get a return on your investment, unless you can find someone to buy you out.
The charges on any profits are steep too – Rocksure will take 17.5% of any profits over and above 20%. This is assuming you have any profits to take – Rocksure will sell the properties in seven years time when the fund closes, regardless of the state of the market. The property locations are hardly up and coming (the Algarve, Morocco and Croatia have all seen large gains in recent years). So if the property crash goes global, you could lose out.
All in all, Rocksure and its rivals offer a “neat way of effectively pre-paying your holiday accommodation”, says Eric Gummers from Howard Kennedy Solicitors in The Sunday Times. But as an investment there are far better things to do with your money. Even if you are determined to buy property, you would be better off taking the £189,000 and buying your own home in an up-andcoming destination – Northern Brazil is one option. That gives you the freedom to buy and sell at your discretion, holiday there when you like and also get an income from renting it out.