NPD/MBI Investmen

AnotherJoe

sendu wrote: »

He paid £260k for it in 2010, and in 2017 got £23k rent, and in 2018 got £25k rent (net). (Don't have figures for earlier years). So unlikely to have made the money back yet, but maybe getting close? It seems to be at a yield of 9+% which sounds great for no effort. Can it really be a scam after 9 years, when the room is real and we can go and stay in it?

If it's not a scam, the question is how does someone distinguish the real opportunities like this one from the scams?

[edit] Just read Aretnap's new post... so it could still be a scam, and there's no way to know until a few more years go by? Does it make a difference that all the rooms were pre-sold day 1, so to speak, as this was used to fund the construction?

It's of course possible that your father is in a genuine scheme that is financially viable. I hope for his sake he is, the difficulty is knowing which tiny % of such advertised opportunities are real and which are frauds of one sort or another. No way to know unless he tries to sell it or enough time has elapsed that it's clear it's real. If it is genuine I'd say he's been very lucky given the large number of frauds you see reported.
For anyone looking at getting into any of these schemes now now I'd say the odds are so high it's an outright scam or a business doomed to fail that it's not a chance worth taking.

Malthusian

sendu wrote: »

He paid £260k for it in 2010, and in 2017 got £23k rent, and in 2018 got £25k rent (net). (Don't have figures for earlier years). So unlikely to have made the money back yet, but maybe getting close? It seems to be at a yield of 9+% which sounds great for no effort. Can it really be a scam after 9 years, when the room is real and we can go and stay in it?

Sure it can. Madoff's scam ran for over 20 years.

Notwithstanding that it could collapse tomorrow and lose everyone's money - including the money of those who've only had a year or two's rent, or none at all - and not be a scam. Running a failed business isn't fraud.

Malthusian

Zanderman wrote: »

Have you read the threads and news reports about the NPD scam? The hotels are real, sure (at least some of them are). But that doesn't mean the investor actually owns a room in one.

The hotels are real and the investor almost certainly owns some kind of lease that blathers on about a room in it.

However a room in a hotel that doesn't make money (because it is obliged to pay 8%+ a year to random punters, and Savills says that the typical yield on a hotel is around 4.25%) is worthless the moment it cannot sustain its liabilities. Which in all of these kinds of schemes is day 1. And nobody is going to buy a failed hotel's freehold if it comes with an obligation to pay 8% to randoms.

Aretnap

sendu wrote: »

If it's not a scam, the question is how does someone distinguish the real opportunities like this one from the scams.

The last few replies have summed it up well, but I'd reiterate that the whole area of unregulated investment 'opportunities' is rotten with scams, and oversold high risk investments (which are not the same as outright scams, though the end result is usually not much different). And for the average retail investor there is in practice no way of knowing in advance which is a real opportunity and which is the dross. Which is why when Joe Punter comes on here and asks if this hotel room/parking space/storage pod/student bedsit is a great investment we usually tell him to avoid it like the plague. Perhaps if you're an ultra high net worth investor with a team of lawyers and accountants to dig deep into the company offering the investment and the people behind it you would be able to find good opportunities... but that would rather beg the question of why you don't just cut out the middleman and buy a hotel yourself, if you thought hotels were a great investment.

But FWIW particular red flags would be the promise of unrealistically high returns (of the order of 10% or so) and the misleading claim that the returns are guaranteed (any guarantee is only worth as much as the person offering it, and in the world of regulated investment even the UK government cannot call returns on its bonds "guaranteed"). An investment which comes with unusually high returns almost certainly comes with unusually high risks... so if the person seeking it wasn't upfront about those risks I would run a mile.

arwain

Aretnap wrote: »

Perhaps if you're an ultra high net worth investor with a team of lawyers and accountants to dig deep into the company offering the investment and the people behind it you would be able to find good opportunities..

Would there be any point in Sendu employing someone like a private detective for a few hours to do some back ground checks on the owners/directors of the company. These people have skills and access to various data bases that most of us have not. So perhaps for a few hundred pounds they might find out the following.

1. The owners are good eggs with excellent track records in business ventures and Sendu's father is one of the lucky ones and has made a good investment.
2. The opposite of point 1.

iglad

https://youtu.be/iyxm8cjMSCo

Malthusian

arwain wrote: »

Would there be any point in Sendu employing someone like a private detective for a few hours to do some back ground checks on the owners/directors of the company.

No, because

a) there is every chance that even if it is a scam, the directors are squeaky clean. It isn't difficult to find people with no blemish on their record to front a scam for you.

b) If the investment fails it would probably be throwing good money after bad. If it's a good investment it's equally pointless - it won't make the dad's returns any higher.

c) If new investment is being considered then running background checks on the directors doesn't remotely constitute due diligence. It's only one of the preliminaries.

sendu

Malthusian wrote: »

If new investment is being considered then running background checks on the directors doesn't remotely constitute due diligence. It's only one of the preliminaries.

For the scam to exist and for people to be taken by it, does it mean that existing standard due diligence is inadequate and can't be relied on for anything?

Doesn't the council managing the area the hotel is being erected in have an interest in ensuring it is a real business and they don't end up with an expensive derelict in the middle of their city? Are no effective checks carried out at this level?

I presume your solicitor doesn't run any form of effective checks either?

Legal professionals are involved at multiple steps of the process, but what are they doing?

Malthusian

sendu wrote: »

For the scam to exist and for people to be taken by it, does it mean that existing standard due diligence is inadequate and can't be relied on for anything?

No, because people fall for scams because they haven't done standard due diligence.

Doesn't the council managing the area the hotel is being erected in have an interest in ensuring it is a real business and they don't end up with an expensive derelict in the middle of their city?

Councils couldn't give less of a crap if people fall for scams. As long as the scam pays any business rates owed, they will do nothing.

City centres are full of construction sites and property developers go under all the time. If a property development firm leaves a derelict on valuable land in the middle of the city, someone will buy the site off the administrators for peanuts, and either complete the building (if the project is viable, once you get rid of the liabilities) or knock it down and build something useful.

sendu

Malthusian wrote: »

No, because people fall for scams because they haven't done standard due diligence.

What is the standard due diligence that potentially OP and my father did not carry out? What should they have done instead?