Car Park Investment - Is it a Scam?
pika_doh9
Posts: 10 Forumite
I bought a car park space at Gatwick airport in March 2016 for £25,000 with a company called Park first. They promised a guaranteed 8% rental return for 2 years.
I just got the paperwork with details about their buy-back scheme.
Turns out after 2 years they offer to buy the parking space back from you for £21,840. They deduct the £4000 (8% of £25,000 over 2 years) and give you £840 interest (2% of £21,000 over 2 years). This means I did not make a rental income, they have simply given me back my own money and the 2% interest isn’t even on the original investment.
I then have to pay solicitor fees which, if more than £840, means I lose money from the investment! Especially with tax on the ‘rental return.’
I was so outraged from the false advertising of 8% rental return! How can they justify giving me back my own money.
They then tried to convince me to sign up to a lifetime lease where after the initial 2 year period has finished, I have to wait another 3 years to sell it back to them or I have the option to sell it to the open market at any time. I was informed that they may or may not buy it back after 5 years, and if they do, then it may or may not be at the original value of £25,000 - but on the plus side I get to keep all the rental return (so the £4000 + whatever % interest I get over the additional 3 years - assuming someone actually parks in the space).
If I sell it back on the open market then they take 5% fee and I pay solicitor fees. So assuming they can only sell it back for £25,000 - they get £1250 and I may only get an additional £1000 in the end after all the fees - so no 8% rental yield.
I also have to mention that if I choose to sell it back, it is a 12 month process and I get no payments or interest in that time.
So in summary I lose money if I sell it back to them after 2 years. I potentially lose money if I sell it back to them after 5 years (because they might again offer to buy it back and deduct what they have paid so far) and I lose money if they sell it back to the open market (assuming I cannot get it sold for £25,000 minimum).
I hope I have explained it well - have I been a fool to invest in a parking space? It looks to me like it does not offer any return.
I just got the paperwork with details about their buy-back scheme.
Turns out after 2 years they offer to buy the parking space back from you for £21,840. They deduct the £4000 (8% of £25,000 over 2 years) and give you £840 interest (2% of £21,000 over 2 years). This means I did not make a rental income, they have simply given me back my own money and the 2% interest isn’t even on the original investment.
I then have to pay solicitor fees which, if more than £840, means I lose money from the investment! Especially with tax on the ‘rental return.’
I was so outraged from the false advertising of 8% rental return! How can they justify giving me back my own money.
They then tried to convince me to sign up to a lifetime lease where after the initial 2 year period has finished, I have to wait another 3 years to sell it back to them or I have the option to sell it to the open market at any time. I was informed that they may or may not buy it back after 5 years, and if they do, then it may or may not be at the original value of £25,000 - but on the plus side I get to keep all the rental return (so the £4000 + whatever % interest I get over the additional 3 years - assuming someone actually parks in the space).
If I sell it back on the open market then they take 5% fee and I pay solicitor fees. So assuming they can only sell it back for £25,000 - they get £1250 and I may only get an additional £1000 in the end after all the fees - so no 8% rental yield.
I also have to mention that if I choose to sell it back, it is a 12 month process and I get no payments or interest in that time.
So in summary I lose money if I sell it back to them after 2 years. I potentially lose money if I sell it back to them after 5 years (because they might again offer to buy it back and deduct what they have paid so far) and I lose money if they sell it back to the open market (assuming I cannot get it sold for £25,000 minimum).
I hope I have explained it well - have I been a fool to invest in a parking space? It looks to me like it does not offer any return.
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Comments
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Unfortunately you've been had. These guaranteed return and guaranteed buyback schemes all come with a list of caveats and are basically a scam. It's easy to offer a guaranteed return if you are only paying back someone's capital and you can get out of paying back the full original investment.
If you can get out with nearly all your money back consider that a good result! Don't continue to throw good money after bad by going for the lifetime lease option. In future consider more conventional investments such as funds.0 -
It's not a regulated investment but a private deal between you and them. The terms are poor. Unfortunately you didn't get it crystal clear in writing on how much they would buy it back for. And even if you had, they might not have bought it back because the entity that promised to buy it back might have closed down or gone bust in the two years anyway and not been able to.I was so outraged from the false advertising of 8% rental return! How can they justify giving me back my own money.
Don't assume it can be sold on the 'open market' for as much as £25,000.If I sell it back on the open market then they take 5% fee and I pay solicitor fees. So assuming they can only sell it back for £25,000 - they get £1250 and I may only get an additional £1000 in the end after all the fees - so no 8% rental yield.
For example, *you* were only willing to pay as much as £25,000 because they offered you a guaranteed 8% (rather than the lower amount that is actually collected from customers) and because they said they'd guarantee to buy it back.
Now when you sell it on to me, you are presumably not going to guarantee my rent income for a few years, nor guarantee that you'll buy it back if I don't want it after a couple of years. You are not going to offer that as part of the package to me, because it would cost you money and risk to provide that guarantee. So why would I pay you £25,000 for it? I could buy a new one off one of these dodgy companies I find online, with 'guarantees' instead?
If I am a mug, I'll buy a new one with the 'guarantees' for £25k. If I am not a mug I won't be in the market to buy individual parking spots controlled by someone else at all. Nobody is going to buy your second-hand space for a full £25,000 when you're not giving them a guarantee. If you want the parking proprietor to help you out by giving guarantees to your buyer (so that the buyer will be willing to pay £25,000) then you are not going to net £25k for yourself.
So basically, don't go dreaming you could sell it on the open market for £25k. You could be waiting a very long time indeed with your money tied up in this asset.
Also, for example lets say there is pika_doh9 and pika_doh10 and they both have these parking spaces. Pika_doh9 sells his back to the proprietor for £21840. Pika_doh10 decides to try to get his sold on the open market for £25,000. Then a punter comes along looking to invest. Which space does the proprietor sell them?
The space that Pika_doh9 just sold them for £21840... which would get the proprietor over £3k profit for themselves if sold for £25k?
Or the space that Pika_doh10 wants to sell for £25k where Pika_doh10 would want all the £25k and the proprietor gets no profit and is left with stock of one parking space of their own. Clearly the proprietor has not motivation to put effort into selling Pika_doh10's space 'on the market' while he still has any unsold spaces of his own which he would also like to sell 'on the market'.
Also, bear in mind that the proprietor could offer that ex-pika_doh9 space (just repurchased from pika_doh9 for £21840) for £22.5k and make a small quick profit after legal costs. If a company is willing to sell spaces for £22.5k... and you would assume there would be a lot of those spaces being made available, because there will be a lot of people selling back to the company after two years to get the hell out of this deal ASAP... , then pika_doh10 is not going to be able to get his sold at £25k because that's not the going rate in the market. The company can set the going rate at whatever price it takes to get things sold.
Yes, it could take 12 months or it could take longer and if you are exiting the arrangement they have no motivation to get people to park on your spot, they would rather have people park on other spots which generate income for them to help support their 'guaranteed rental income' for others.I also have to mention that if I choose to sell it back, it is a 12 month process and I get no payments or interest in that time.
Yes but you are losing a set amount of money and you get to get out of it with some money and are no longer at risk of being stuck in this bad investment for years to come. That is the very best thing you can do.So in summary I lose money if I sell it back to them after 2 years.
You have identified it was a bad deal to have bought this thing and the company have been less than transparent with you so far - it would be ludicrous to think that you should keep it for another 3 years and hope the terms are better. Remember they will have had a lot of people scrambling for the exits having realised that they bought into a terrible deal. So don't assume the company will still be around in three more years or that the going rate will be north of £20k. So, don't hang around. Get out now.I potentially lose money if I sell it back to them after 5 years (because they might again offer to buy it back and deduct what they have paid so far)
There is no way you can get it sold for £25,000 minimum when you are not providing a guaranteed income to whomever buys it off you, and the company has no motivation to prioritise your sale over the sale of its own stock, and the market is flooded with all the spaces from all the people getting out after their own 2-year-minimums which they are giving to the company for £21840.and I lose money if they sell it back to the open market (assuming I cannot get it sold for £25,000 minimum).
On the 'market' there will be loads of spaces available at £22k (or at £25k which give the company a nice profit) so there is no way the company will choose to sell yours for £25k for zero profit for themselves.
CorrectI hope I have explained it well - have I been a fool to invest in a parking space?
It 'offers' a return but doesn't deliver.It looks to me like it does not offer any return.
That's why much of the discussion on this website is about investing in genuine regulated investment funds or through regulated independent investment advisers, and the only discussion threads about unregulated investments are packed with people saying Avoid Avoid unless you have millions of pounds to invest and want to take a complete punt with a small proportion of your wealth just for fun.
Your very best option, if the company is willing to buy it off you now for a fixed price, is to take that fixed price and get out now. They will try to offer you something tempting to stay in the deal for longer so they can make more money off your money. Do not be tempted, because staying in this unregulated private investment could easily cost you £20k more loss when the company collapses and nobody wants to pay more than a few pounds per square foot for your land and it costs you lots of legal fees to assert your rights over the property.
If you decide to give it 3 more years rather than taking the money and running now, you are taking more of that risk of losing all your money. Likewise if you try to wait a year or more to sell it on the 'open market', not that an open market really exists because it is a niche product controlled by the company who sold you the space and is dominant in the market.
Remember if you hold on for longer and lose money you are not just losing the money you lost, but the money you could have made by putting the £20k into a bank deposit account or S&S ISA or pension - the 'opportunity cost' as well as the actual loss of your capital on the parking [STRIKE]scam[/STRIKE] investment.
So, having realised your mistake, get out of it now ASAP.0 -
Unfortunately the investment world is full of scam artists. And some well known banks have been involved in some pretty nasty schemes such as Libor fixing, and deliberately sending companies bust.0
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greendoor665 wrote: »If you can get out with nearly all your money back consider that a good result! Don't continue to throw good money after bad by going for the lifetime lease option. In future consider more conventional investments such as funds.
This ^^^^^^^^^^^
Take the money and consider yourself lucky.0 -
Agree. If you can get out of this with most of your money then take it. Learn from it.Personal Responsibility - Sad but True
Sometimes.... I am like a dog with a bone0 -
Bowlhead has said most of the things I'd say, only better than I'd have said them, but I'll just reinforce the views of the others. By "investing" in this scheme you have fallen into a giant heffalump trap. You're not the first and you won't be the last, but the harsh truth is that most people who invest in schemes like this lose the vast majority of their money. If you have a way of getting out only having lost a little bit of your money, you should grab it with both hands and count yourself as one of the lucky ones.
Do not throw good money after bad, do not sign an extended lease, do not hold on in the hope that things will improve - take whatever you can get and walk away before the whole thing falls apart, as is already happenening with the sister company StoreFirst (which sold storage pods rather than parking spaces under much the same terms).0 -
It really isn't practical to own one space in a car park, or one storage pod in a warehouse, when someone else owns the entry and exit roads, and you depend on them to tell you how many people used it and collect your money.
Its just a trick to make you feel you are owning a real asset instead of a piece of paper share in the company. But the piece of paper share in the company is actually a lot safer and more practical.“It is difficult to get a man to understand something, when his salary depends on his not understanding it.” --Upton Sinclair0 -
Just in case it wasn't clear, OP, if you can get the rest of your initial stake back (minus the 8% of your own money they already returned to you), minus a few quid in solicitor's fees, you should bite their arm off.
Most people who invest in schemes promising "guaranteed returns" of 8% per annum are not that lucky.0 -
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