Has anyone invested in hotel rooms

jamesd

molit wrote: »

I've been looking at the kind of scheme with guaranteed rental and buy back. It looks like a good return, but it almost seems too good to be true. I understand mortgages might be ""difficult" but other than that, have people actually bought one and seen a return?

Mortgages are normally impossible because mortgage lenders are too sensible to offer them and even if they wanted to the valuations wouldn't normally support the purchase price desired by the seller.

Typically these are foreign deals where the buyers pay an inflated price to cover the guarantee or the firm providing the guarantee goes bust, as originally planned, leaving the investors with unsaleable rooms and no guarantee.

There are occasionally deals on well regulated countries where the only scam is the inflation of the price to pay for the guarantee. Even these normally have silly purchase prices.

Guaranteed rent and buyback, if the price is said to be the original one, is almost certain to be fraud because if the terms were to be honoured there would be little room for profit for the seller.

Since it looks like a good return, is it the 12% or more less perhaps 2% bad debt secured by property that's currently readily available in P2P lending?

eddddy

A few years ago I read the full 106 pages of legal pack associated with one of these schemes. (Leases, lease back agreements, buy back agreements, management agreements)

It was totally biased towards the "investment company" and full of 'bear traps' for the "investor".

As an example, to paraphrase a clause about "Guaranteed Buy Back" around page 95 of the legal pack...

We guarantee to buy the investment back, if we have sufficient funds to do so.

Our decision on whether we have sufficient funds will be final. We will not tell you how much funds we have, what would constitute sufficient funds, or enter into any discussion on this matter whatsoever.

i.e. No guaranteed buyback whatsoever.

Also, regarding guaranteed returns ... maybe you buy an investment for £50k with 10% returns guaranteed for 5 years.

But if the investment's real 'value' when you buy it is, say, £20k (or £0k), it's not such a good deal.

jimjames

molit wrote: »

thanks for all of the replies - It is good that it isn't a complete scam - to my mind it is similar to P2P lending, but you get an illiquid asset as collateral. It all comes down to due diligence, and appetite for risk, but it is good to know that it is a valid investment scheme.

Many are not valid investment schemes. Just because something is possibly legit doesn't mean that every example of it is. I know there were valid timeshares but it was also known as a very dodgy area for rip offs and scams.

Storage units are also a valid business. It appears that some companies selling them off as individual storage pods are not. Have a look for Store First. If you can divide something up into micro portions and sell for 10x your money then give some back to the investor as "income" you are still making a fortune.

Aretnap

molit wrote: »

to my mind it is similar to P2P lending, but you get an illiquid asset as collateral

Illiquid or just plain worthless?

A common theme of these type of scams is that they offer the investor the "reassurance" of owning an actual physical asset - even if the worst happens you'll still have your parking space, or your hotel room or whatever.

But when the crooks who run the business have taken the money and scarpered, what are you actually left with? A few square feet of Tarmac on a patch of wasteland, or a room in a boarded up hotel? Realistically how is anyone going to earn money from that, or who is going to buy it? Even if someone wanted to buy the whole hotel and run it as a going concern, or turn it into flats, the prospect of negotiating with dozens of individual room owners, each of whom could presumably scupper the deal, must make it a rather unattractive proposition.

Viewed as shared in an ongoing business the investments in this type of scheme may look risky and overpriced - but viewed as discrete entities it's often not obvious how they can have any value at all.

chucknorris

eddddy wrote: »

A few years ago I read the full 106 pages of legal pack associated with one of these schemes. (Leases, lease back agreements, buy back agreements, management agreements)

It was totally biased towards the "investment company" and full of 'bear traps' for the "investor".

As an example, to paraphrase a clause about "Guaranteed Buy Back" around page 95 of the legal pack...

We guarantee to buy the investment back, if we have sufficient funds to do so.

Our decision on whether we have sufficient funds will be final. We will not tell you how much funds we have, what would constitute sufficient funds, or enter into any discussion on this matter whatsoever.

i.e. No guaranteed buyback whatsoever.

Also, regarding guaranteed returns ... maybe you buy an investment for £50k with 10% returns guaranteed for 5 years.

But if the investment's real 'value' when you buy it is, say, £20k (or £0k), it's not such a good deal.

That reminds me of when we went to Malta for a package holiday about 10 years ago, I said to my wife, the hotel is running a free trip over to their new development hotel on the other side of the Island. She wanted to go, but I didn't tell her until we got on the coach that it was almost certainly going to be a time share hard sell. But I was curious about it (about their tactics) and so was she. They ran through their spiel, then divided us up, I asked straight away to see a contract, so I could read it over, of course it wasn't available 'at that moment'. So I said that's OK I'll take a copy back to the hotel later and read it over there. But they said we don't want people taking the contracts in case they steal our ideas :rotfl:

Anyway they were making a big thing of the fact that if you bought a time share in this Malta development, you could swap it for a holiday in their other resorts all over the world. That seemed too good to be true, looking at the list of their other resorts, then my wife and I said virtually together 'is there some sort of "subject to availability" condition on that?' That was the issue, no one was going to swap the Caribbean for Malta.

Anyway we got back to the hotel and I bumped into two of the Streatham girls that we had met, and I said, god what a rip off those time share deals were, weren't they? But they came back with 'we've just bought one'!

jamesd

While by contrast, many of the UK P2P places are backed by properties with UK RICS surveyor valuations and reports that you can read. Never perfect but a good deal more trustworthy.

Malthusian

While there may well be legitimate commercial ventures in the hotel industry, the legitimate ones do not cold call retail investors, and therefore people do not come on MSE asking "someone's cold called me about investing in hotel rooms, is it a good idea" if the opportunity is legitimate.

We can therefore be unambiguous about whether it's a scam or not.

Anthorn

Malthusian wrote: »

While there may well be legitimate commercial ventures in the hotel industry, the legitimate ones do not cold call retail investors, and therefore people do not come on MSE asking "someone's cold called me about investing in hotel rooms, is it a good idea" if the opportunity is legitimate.

We can therefore be unambiguous about whether it's a scam or not.

Can you provide a link to that information. I tried a search on MSE but it didn't come up with anything.

jimjames

Anthorn wrote: »

Can you provide a link to that information. I tried a search on MSE but it didn't come up with anything.

What exactly are you searching for? Regulated, legitimate investment companies do not cold call.

atush

EdGasket wrote: »

Has anyone invested in hotel rooms

....only for illicit sex

Dont you have any licit sex?