Property loan

smej

I'm not sure if this is the correct place for the thread but here it goes. I'm a long time lurker in the savings and investments thread but recently I've been looking in to diversification. I have considered property but been put off with the ever increasing costs and general hassle involved. Instead i have come across a developer offering between 10 and 15% returns on money lent to him. He guarantees the rate and repays the money after 12 months. I'm just wondering how secure these types of agreements are? Without having seen the agreement, are they even worth the paper they are written on if things go belly up?

TadleyBaggie

Are they secure, not at all. Anyone who is guarantees twice the returns available elsewhere, is either deluded or a crook.

DullGreyGuy

smej said:

I'm not sure if this is the correct place for the thread but here it goes. I'm a long time lurker in the savings and investments thread but recently I've been looking in to diversification. I have considered property but been put off with the ever increasing costs and general hassle involved. Instead i have come across a developer offering between 10 and 15% returns on money lent to him. He guarantees the rate and repays the money after 12 months. I'm just wondering how secure these types of agreements are? Without having seen the agreement, are they even worth the paper they are written on if things go belly up?

Without seeing it no one can say. 

Ultimately it begs the question why anyone would offer to "guarantee" 2x the rate of reasonable lending? Why can they not borrow at the normal rates and just bag the difference for themselves? Most of these aren't actually guaranteed and instead are highly speculative. Sure some will speculate and accumulate but others will invest and lose at least some of their capital. 

Much more due diligence is required before investing and then decide if its within your risk appetite.

silvercar

I'll move this to the housing board.

user1977

What does "guaranteeing" the rate actually mean? Are they offering any sort of security (e.g. a charge over property they're developing)?

penners324

silvercar said:

I'll move this to the housing board.

This is more stupid investing/ a scam than housing

penners324

user1977 said:

What does "guaranteeing" the rate actually mean? Are they offering any sort of security (e.g. a charge over property they're developing)?

They guarantee the rate until they stop getting new 'investors' and actually expected to build something.

Often referred to as a ponzi scheme 

eddddy

smej said:

I'm not sure if this is the correct place for the thread but here it goes. I'm a long time lurker in the savings and investments thread but recently I've been looking in to diversification. I have considered property but been put off with the ever increasing costs and general hassle involved. Instead i have come across a developer offering between 10 and 15% returns on money lent to him. He guarantees the rate and repays the money after 12 months. I'm just wondering how secure these types of agreements are? Without having seen the agreement, are they even worth the paper they are written on if things go belly up?

You need to do a lot of due diligence on the people who will end up with your money in their pockets. Do you know who they are?

TBH, this sounds word-for-word like some investment 'scams' I have come across.

Typically, somebody with no track record, no experience and no money decides they will set up an investment scheme. It's completely unregulated.

One scheme I came across had a similar guarantee. Page 94 of the legal pack gave more details about the 'guarantee'. Something like this...

Guarantee
We guarantee to pay you x, y, z, after 12 months, if we have sufficient funds

• It is our decision whether we have sufficient funds

• We will not tell you how much funds we have

• We will not tell you what constitutes sufficient funds

• Our decision is final, and we will not enter into any discussion with you on this matter

I imagine they were relying on people not reading as far as page 94 of the legal pack.

Plus there were confidentially clauses, meaning people weren't allowed to warn others that they had been scammed.

Herzlos

It definitely sounds like a scam.

"Instead i have come across a developer offering between 10 and 15% returns on money lent to him. He guarantees the rate and repays the money after 12 months."

If the return on investment was that good why isn't he borrowing at 5% and keeping the profit, or using his own money?

How did you find this developer? Do they have any pedigree or reputation?

Personally I wouldn't touch it. If it sounds too good to be true...

Albermarle

It sounds very similar to various P2P ( peer to peer) companies that were in this area.
They offered shares in loans to property developers at 10% +, with the assurance that due diligence on the projects had been done and with security against the property.
Pretty much all of them have gone under, leaving lenders high and dry.
Too many dodgy borrowers/developers, too many bad debts and the properties that were supposed to be security had often been greatly overvalued.

To be fair there have been some successful companies in this area, but usually these were/are only offering returns more in the 6 or 7% region.

theartfullodger

Too good to be true, very very likely a bunch of snake oil selling crooks.

No offence but the worrying thing for many people is that you were considering it.  Not me obviously, but others...