Where's the catch? Hawthorn Care Village...

An ad in the Sunday papers caught my eye. It says 12% a year for 10 years...
Investment of £75,000 gives a rental income of £9,000 a year. Take the first 2 years rental as a discount, so initial investment reduces to £57,000. You receive £9,000 a year from years 3 to 10 and can then sell the suite back to the developer for 125% of initial investment, which is £93,750.


They say they are helping to address the dire shortage of dementia care beds, and have formed a joint venture with Lancashire local authority to build Hawthorne Care Village in Burnley to build a dementia care unit, with the council having a Sole User agreement to ensure all suites are fully occupied by local authority funded patients. This joint venture gives private investors the chance to own a suite within the village on a 125 year lease with full legal title, lease it to the care home management company and receive 12% rental income for 10 years, then sell it back to the developer for 125% of initial investment.
The ad says "12% a year for 10 years? Surely that's too good to be true?" It does sound a bit far fetched so I thought I'd ask you. Here's a link:
http://www.eliteinvestorclub.com/portfolio/hawthorn-care-village/
What do you all think?
As a fan of THE NUMBER THREAD, our NUMBER IS £22,000 a year = FREEDOM
Amended 2019 - new NUMBER is approx £27k pa nett (touch wood)
Amended 2021 - new NUMBER is approx £29k pa nett - heading that way...fingers crossed!
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Replies

  • le_louple_loup Forumite
    4K Posts
    The ad says "12% a year for 10 years? Surely that's too good to be true?"
    What do you all think?
    Agreed TGTBT> Most sound businesses could raise a loan at from 3% - 6% from a bank.
  • rebecca1rebecca1 Forumite
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    I saw this ad in the Sunday times home section. But that ad said 10% return in the third year. I rang the company to enquire but the women on the phone was totally unprofessional and put me of the idea.

    I then thought to get some legal advice on this investment proposition.
    Shall watch this forum for comments though. With just being caught up in the credit union going under (EBCU) I look at everything a little more cautiously now.

    Rebecca
  • dunstonhdunstonh Forumite
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    Without prospectus the following things come to mind:

    1 - The 12% rental return is not guaranteed. Do not mistake commercial guarantees for financial services guarantees. The latter is guaranteed. The former is subject to developer still being in business and able to meet its obligations.
    2 - Guaranteed sell back to developer for 125% of your initial investment after 10 years - again not guaranteed. It is subject to developer being there.
    3 - No mention of charges. (How much do you need to pay the "letting agent", ground rents etc)?
    4 - Dont forget refurb costs and maintenance
    5 - Yields reflect the risk. Why cant this business raise finance from the banks for less than 12% when the base rate is 0.5%.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • ColdIronColdIron Forumite
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    • The investments that we show are unregulated and therefore not covered by the Financial Services Compensation Scheme (that covers up to £85,000 in a High Street bank).
    • Unregulated investments are not covered by the Financial Ombudsman scheme so you will not have redress there if anything goes wrong
    • Because we are not licensed, we are not able to obtain professional indemnity insurance cover so there is no policy you can claim against
    Rather you than me
  • MrsFingersCrossedMrsFingersCrossed Forumite
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    Thanks everyone. I thought it must be too good to be true!
    As a fan of THE NUMBER THREAD, our NUMBER IS £22,000 a year = FREEDOM
    Amended 2019 - new NUMBER is approx £27k pa nett (touch wood)
    Amended 2021 - new NUMBER is approx £29k pa nett - heading that way...fingers crossed!
  • jimjamesjimjames Forumite
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    Thanks everyone. I thought it must be too good to be true!

    Whether it's carbon credits, airport parking, storage units or ones like this you need to be aware that there are no guarantees and there is a high likelihood of losing money with unregulated investments.

    If the company decide to disappear after 9 years and 11 months then there is no one to pay your money back and nothing you can do.

    Sadly with the new pension freedoms I can see more and more people being scammed by this type of unregulated investment.
    Remember the saying: if it looks too good to be true it almost certainly is.
  • jamesdjamesd Forumite
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    Lancashire County council is the relevant regional local authority. If you search their web site or that of Burnley council you will find no relevant matches. Since councils and politicians want to be seen to be doing things this is likely to be a good indication of the actual state of the project. You can also do things like checking for planning applications or emailing the local authority and council to ask for more information about their claimed plans for the scheme.
  • jimjamesjimjames Forumite
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    Amazing how Google is so popular yet underutilized for this kind of basic check.
    Remember the saying: if it looks too good to be true it almost certainly is.
  • jamesdjamesd Forumite
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    Right. For this one what I found was only mentions that were promoting the deal, nothing independent and nothing else to confirm it. Oh, and now this discussion topic about it. :) Interesting to see it being promoted even in Chinese and Arabic scripts in some places.

    None of this necessarily means that it is not genuine, just that a good deal more due diligence is required before considering proceeding, like at least verifying facts with the local authority.
  • HappyHarryHappyHarry Forumite
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    Take a look at the front page of the Independent today for more on Hawthorn Care Village and MBi - I'd be interested in hearing from anyone who has taken out one of these investments.

    If you're a journalist Melanie, then you need permission to be requesting details such as this this.

    See: http://www.moneysavingexpert.com/site/forum-faqs for further information.
    I am an Independent Financial Adviser. Any comments I make here are intended for information / discussion only. Nothing I post here should be construed as advice. If you are looking for individual financial advice, please contact a local Independent Financial Adviser.
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