Property investment scams?

Zanderman

sendu wrote: »

So, are either of these deals sane? Are they even good deals considering the 10 years? If they are good deals, why would any developer do deals like this? If the above doesn't strictly contain any lies, is their claimed valuation of the property just too high, and that's the scam?

Your figures, on a very quick google, look very similar to the sorts of figures in this brochure:
https://www.select-portfolio.co.uk/uploads/docs/Opportunity_Deferred_Brochure-2BED_CLASSIC12.PDF
Not the same as yours, but very similar, suspiciously so, in format.

The 'properties' in that are holiday lodges, which are invariably overpriced by those promoting them as investments and, unlike normal bricks and mortar, depreciate over time. And are subject to variable rental income, changes in site management and increasing site management fees, all eating into the rental income.

There have been several threads about such properties on MSE in the past - the basic lesson being, don't touch them if you want your money back.

The deal you're quoting may not be like these - but I suspect it could be, or another from the same stable.

If it looks too good too be true, it is too good to be true.

AnotherJoe

sendu wrote: »

Thanks. The specific one I looked at has 2 options and these schedules:

Full Purchase:
Purchase price: £205,000
Client cash input (with 3 years by deduction): £143,500
Reservation fee: £1000
Balance of cash input: £143,000
Assured tenancy period: 10 years
Income: 10%
No. of years by deduction: 3
No. of years on full purchase price: 7

Year | Rental Income (10%)
1 £20,500 by deduction
2 £20,500 by deduction
3 £20,500 by deduction
4 £20,500
5 £20,500
6 £20,500
7 £20,500
8 £20,500
9 £20,500
10 £20,500
Total £205,000

Buy back at 125%: £256,250
Total Purchaser Returns: £205,000
Less Cash Input (including three years deduction): £205,000
Cash received over and above purchase price: £256,250
ROI: 125%

Developer Finance:
Similar sort of idea as above, but you put in £82,000 (for the same property), and a proportion of the yearly rent goes in to covering the rest of the initial purchase price. That gives an ROI of 268% after 10 years.

So, are either of these deals sane? Are they even good deals considering the 10 years? If they are good deals, why would any developer do deals like this? If the above doesn't strictly contain any lies, is their claimed valuation of the property just too high, and that's the scam?

The fact they can say what rental income will be ten years out says if it's not a scam, it's so close as to be no difference. What if people stop coming to this place for any ofa zillion reasons ? WHo pays out the rent when there's little or none coming in ?..
Without being too critical, at that point you should have realised you were looking at something looking to take in suckers and walked. At least you asked here. No further investigation necessary, as said above, there's a ton of holiday rental and student lets with similar "more than optimistic" financial predictions and they all end up the same way, with people locked into money losing contracts.

sendu

Ok, thanks all. So are the only non-scam property investments:

a) REITs on the stock market
b) Buying your own BTL from an estate agent

Anything else?

jimjames

sendu wrote: »

Ok, thanks all. So are the only non-scam property investments:

a) REITs on the stock market
b) Buying your own BTL from an estate agent

Anything else?

Plenty of other things that are not scams but pretty much impossible to define them all here. There are Property funds (unit trusts/OEICs/ETFs) that are regulated products.

There are people looking for JV partners who are genuine developers/investors but they aren't ones who would advertise the sorts of rates/offers you've seen. There may be other property investments that are real but the ones that tend to divide land or property up into parcels to sell it - such as storage pods, car parking spaces etc are likely to end in tears.

Anything that is guaranteeing a high rate of return that is unrelated to the performance of the asset is likely to be either extremely high risk or a scam.

AnotherJoe

sendu wrote: »

Ok, thanks all. So are the only non-scam property investments:

a) REITs on the stock market
b) Buying your own BTL from an estate agent

Anything else?

Builders. Persimmon, Barratt, etc.
Companies that supply the building trade Jewson and the like