This article was published in May 2006 being a warning to potential investors to take care when checking out property investments. Hundreds of investors actually signed up around, and are getting involved in a joint law suit, but many more, including a lot of the leading banks, some now in government hands, went on to get linked to hundreds more bad deals, and so are counting the expenses in millions!
For individuals that saw the Sunday Times most visited page article 'Buy To Let Property Fraud Hits Thousands' the week before Christmas 2008 may have seen the latest connection between that misdemeanour, and also the losses and heartaches this widely spread property fraud had on investors an f their own families.
To lots of people, going for it, and purchasing property for their future is really a major leap of faith. Imagine where did they must feel, if their investment turns out to be a great investment property Scam?
Is there an easy method away from any Investment Property Scam?
The right off the bat to understand is actually you need to do feel you are conned, prehaps you are only one one. It may feel like it, and you may feel alone, stupid, cheated, and angry or embarrassed - a few of the common emotions felt right now.
But, these are the emotions that developers with crooked minds will encourage you to definitely think. They hope you will feel 'suckered', and don't wish to tell anybody. In fact, with a clever scam, there may appear to be not even attempt to tell anyway, aside from your gut instinct, and soon you start digging.
But inertia is just what these criminals (and so they usually are criminals) want one to think. In these circumstances, you mustn't hold all of it into yourself. You must try to find if people are already duped in to a similar situation. You never know, you may well be one of ten, twenty or a huge selection of similar souls, and when you can find, and grow identified with such groups you are going to stand a certainly better possibility of getting retribution, believe me.
I got caught up in such a good investment property scam about 1 . 5 years ago (I know - gasp - shock - horror - and I sell investment properties!). For some months, I thought I was going crazy, I can't realize why I can't get tenants in at anywhere near the prices I was expecting, or perhaps get tenants in any way. This was the 1st revelation, as I had been promised how the properties would happen to be fully tenanted on completion. Well, at least, it is exactly what the brochures said, plus the sales director in the presentation I attended. And I had purchased a quantity of these 'beauties' each supposedly fully tenanted and making me around £500 each a month rental surplus.
Then I started to research the problem more thoroughly, and I soon identified the problem. It's a down and out highly complex investment property Scam!
So how did I, a professional property investor, plus a reseller of investment properties - get involved in a good investment property scam?
I'll show you how - perhaps Criminal Intent?
What I have done is always to chronicle the events that basically took place with my investments, ones I have since found out there have been above 100 similar incidents.
Before I went into this investment, as well as recommended these phones others, which consisted of a variety of refurbished houses become HMO's for young students (Houses of Multiple Occupation) I investigated the company thoroughly. (Note the business and of these houses is just not mentioned in this report for legal reasons). I checked out a minimum of 6 of these property conversions, spoke with their rentals people, and spoke with several existing investors. I took my business partner on the time with me to view my findings. I was also comforted by the fact that they will were spending (and still are spending) a lot of cash inside the big national newspapers (Sunday Times, Telegraph, and the like), along produced a whole range of glossy brochures backing up their claims.
Some of these larger off-plan developments were also being featured inside a two-page spread in certainly one of the UK's leading property magazines. Not only that, but they had (but still really have) large exhibition stands with a amount of the leading UK Property Shows.
Everything appeared to stock up, so I bought a amount of them, and encouraged my girlfriends, close family, and business colleagues to buy some also. I paid my reservation fees, and just been feeling relaxed to wait for these to get completed, and also to start generating some surplus cash monthly.
The first event within the chain of things was the houses were very late in becoming completed, therefore we were in danger of losing each student intake for autumn 2005, nevertheless the investment still seemed quite good, and anyway there was all exchanged contracts at that same moment. And, obviously, many of us thought we'd no less than an 11% equity holding in each property, as well as the usual increase of 4-6 % from last year. Also, when asked when we could inspect them just before completion, i was told - "Sorry, because you have tenants in them, you must give 48 hours or higher notice". Then when we did try for appointments nobody could find the keys… Where were my alarm bells I hear i hear you ask - Obviously on Silent Mode!
But then this dirt really began to rise on the surface…
These houses were all sold within the premise of 'All contacts for services under one roof for that investor - Use our Services for Sales, Recommended Solicitors, In-house Brokers, mortgages, Tenancy Management from your Own Company' - you know, a very good packaged deal to the armchair investor.'
Issue 1 was how the houses were not fully tenanted on completion, and in a very lot of cases, the tenants seemed to 'melt away' after contracts had been signed. So much for that promises made inside the developers' glossies that tenants could be set up before completion, with cross-guarantees to ensure that there can be virtually no void periods, no difficulties with rent, as though one tenant still did not pay, the cross guarantees meant how the other tenants can be liable.
Also, occasionally, (steer clear mine luckily) no renovation work have been performed at all, and the developers then had the cheek to inquire about £3,000 per property to solve those who had not been done. Then, major difficulties with the structure work started to surface. Basements would flood, not due to rain, (although this did happen on a quantity of occasions the place that the basements had not been 'tanked' correctly), but as a result of faulty plumbing, But if course we'd a twelve month warranty contract - Right? Wrong?
Even after constant telephone calls and emails, the management company did not send us proper records, plus they failed to keep us informed of maintenance issues, tenants leaving, tenants failing rent by the due date - every one of the sort of standard things one was adopted to expect coming from a 'proper' management company that charged 10% with the rent as fees.
And the effort I had moving the management agreements to a different company is another story for the next day if this can be told.
Ok, so, this just gave the look of rogue building work and an outright total insufficient proper management through the department handling the tenancies. Not the type of service to become expected from a firm performing a great deal nationwide marketing, but of course, being for these a high profile firm, you would have thought they will have fixed the problems. Right? Wrong!
So as a consequence of these issues, I had right now started to perform some very intensive investigation into this business, and also the methods getting used to package the sale of those houses.
It then transpired that a lot of of those houses have been bought from the developer some three or four months prior to selling them, some the prior morning, for approximately £90,000 - inside the developers words - derelict houses that have been totally gutted; 3 bed properties which had basements opened out, as well as roof conversions done, so adding as many as 2, 3 or even 4 more bedrooms, and supposedly converted on the highest of standards for HMO purposes, and these were sold to us for around £249,950 as much as £325,000 and.
Ding Ding Ding - Alarm Bells…
Why were we quite happy to purchase them - since they all came with RICS (Royal Institute of Chartered Surveyors) valuations about the property value and the anticipated rental incomes.
All ones matched the developer's claims.
But when we pointed out that several investors from other groups were having some of those similar houses repossessed - as they just weren't receiving the rent, and consequently can't give the mortgage, and the valuations were all coming in about £80,000 to £100,000 BELOW THE MORTGAGE VALUE!
Our own investigations then uncovered that numerous of the properties had been valued through the same firm, as well as comparison, they'd used properties from the same developer on the valuation form.
We have been exposed to instances the place that the mortgages which were granted they :-
· Were not valid for multiple occupancy homes - exactly why was a loan granted?
· Would not happen to be granted had financial institutions known the properties were already tenanted, and never sold as vacant possession. So why was obviously a mortgage granted?
· Would not happen to be granted in the event the valuation rental assessment wasn't realistic. So loans were granted on incorrect information. If the investor had position the rental figures in, they'd likely have been accomplished for mortgage fraud.
· Would not have granted a loan (especially interest only) when the true valuation figure was known.
· Would not have granted 85% with the assumed value had they known a Gifted Deposit was being paid (together with legal along with other fees by the developer). The solicitor was aware, as was the broker, so, just how come the bank wasn't informed?
Now, as I like to consentrate of myself as a 'savvy investor', knowing that gifted deposits, cash backs etc happen and quite often jump start the property market around the move, I had told my solicitor(s) just what the side deal was, the broker explained what are the deal was, so no issue right?
Wrong… I then learn that neither the solicitor(s) nor the broker had informed the bank.
Somewhere across the lines, something was wrong here.
The question is - Was it down to:-
· The Developer?
· The Solicitor?
· The Broker?
· The Investor?
In a society where regulations covering solicitors, brokers, mortgage loans, and valuers seem quite strict, I must say I think something is awry here, the location where the hapless individual investor can enter this unregulated trap!
If you feel you've been involved with such a great investment property scam, and would prefer to check if you will find others in the same boat, kindly visit my blog where one can voice your opinion, and also add your business to your structured list if you need therefore we can increase your database of like events that may be easily analysed to identify trends, or passed to 'Watchdog' for instance.