Property company offering high yield

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BogleInvestorLondon
Posts: 145
Joined: Mon Nov 25, 2013 10:16 am

Property company offering high yield

Post by BogleInvestorLondon » Wed Nov 15, 2017 3:30 pm

Hi all

I am always skeptical when I hear about high yields being offered. My friend found this company and wanted my opinion.

My friend spoke on the phone to this company and they told him about property that is going to be developed in Bristol in the UK and could offer a return of up to 40%. I went on their site and they seem to have a lot of property being offered for investment - even in the US.

The company name is 'Five Quadrant' (http://www.fivequadrant.com) and they said the work in Bristol is being carried out by 'The Coyne Group' which is a real estate asset management firm.

Has anyone had any experience in these types of investments?

Thank you

Valuethinker
Posts: 33428
Joined: Fri May 11, 2007 11:07 am

Re: Property company offering high yield

Post by Valuethinker » Wed Nov 15, 2017 4:05 pm

BogleInvestorLondon wrote:
Wed Nov 15, 2017 3:30 pm
Hi all

I am always skeptical when I hear about high yields being offered. My friend found this company and wanted my opinion.

My friend spoke on the phone to this company and they told him about property that is going to be developed in Bristol in the UK and could offer a return of up to 40%. I went on their site and they seem to have a lot of property being offered for investment - even in the US.

The company name is 'Five Quadrant' (http://www.fivequadrant.com) and they said the work in Bristol is being carried out by 'The Coyne Group' which is a real estate asset management firm.

Has anyone had any experience in these types of investments?

Thank you
Think Private Eye. Do your homework.

FCA record of complaints? Are they FCA regulated? Authorized to market to retail investors?

Trading Standards officer?

Individual FCA records of the directors and personnel? Violations?

Previous track records of the Directors? Bankruptcies? Director of bankrupt companies?

The returns are not guaranteed? Has your friend had an accountant check the model?

Personally I'd run a mile. Your friend will wind up in the complaints column of the weekend newspaper.
Last edited by Valuethinker on Wed Nov 15, 2017 4:21 pm, edited 1 time in total.

Valuethinker
Posts: 33428
Joined: Fri May 11, 2007 11:07 am

Re: Property company offering high yield

Post by Valuethinker » Wed Nov 15, 2017 4:05 pm

BogleInvestorLondon wrote:
Wed Nov 15, 2017 3:30 pm
Hi all

I am always skeptical when I hear about high yields being offered. My friend found this company and wanted my opinion.

My friend spoke on the phone to this company and they told him about property that is going to be developed in Bristol in the UK and could offer a return of up to 40%. I went on their site and they seem to have a lot of property being offered for investment - even in the US.

The company name is 'Five Quadrant' (http://www.fivequadrant.com) and they said the work in Bristol is being carried out by 'The Coyne Group' which is a real estate asset management firm.

Has anyone had any experience in these types of investments?

Thank you
Oh even more fun.

By phone. Confidence inspiring.

Valuethinker
Posts: 33428
Joined: Fri May 11, 2007 11:07 am

Re: Property company offering high yield

Post by Valuethinker » Wed Nov 15, 2017 4:20 pm

BogleInvestorLondon wrote:
Wed Nov 15, 2017 3:30 pm
Hi all

I am always skeptical when I hear about high yields being offered. My friend found this company and wanted my opinion.

My friend spoke on the phone to this company and they told him about property that is going to be developed in Bristol in the UK and could offer a return of up to 40%. I went on their site and they seem to have a lot of property being offered for investment - even in the US.

The company name is 'Five Quadrant' (http://www.fivequadrant.com) and they said the work in Bristol is being carried out by 'The Coyne Group' which is a real estate asset management firm.

Has anyone had any experience in these types of investments?

Thank you
Btw development risk is 2x to 10x the risk of letting property.

You have Planning risk. Site risk. Construction cost inflation risk. You can go broke whilst suing a contractor.

BogleInvestorLondon
Posts: 145
Joined: Mon Nov 25, 2013 10:16 am

Re: Property company offering high yield

Post by BogleInvestorLondon » Wed Nov 15, 2017 7:15 pm

Yeah, so it seems these are both limited companies (which anyone could set up).

I had a read through their site. Your funds are basically received by an new company and invested from there. Your money is parceled with other investors. A new company rings alarm bells because couldn't someone set up a company, take your money, then that company goes bust while they have stolen your money, meanwhile the original company 'Coyne Group' is not liable.

Valuethinker
Posts: 33428
Joined: Fri May 11, 2007 11:07 am

Re: Property company offering high yield

Post by Valuethinker » Thu Nov 16, 2017 9:32 am

BogleInvestorLondon wrote:
Wed Nov 15, 2017 7:15 pm
Yeah, so it seems these are both limited companies (which anyone could set up).

I had a read through their site. Your funds are basically received by an new company and invested from there. Your money is parceled with other investors. A new company rings alarm bells because couldn't someone set up a company, take your money, then that company goes bust while they have stolen your money, meanwhile the original company 'Coyne Group' is not liable.
None of these is wrong in itself.

But these people are marketing an investment. That brings all the FCA regulation with it.

So that means the Directors have personal records (bankrupt companies etc.) and are on the FCA register. And if that is not true, then how do they skirt around the rules about marketing investments? Are they renting their FCA cover from someone else.

What type of development property is this? Residential? Commercial? What type of commercial? Student housing for example looks like a real bubble to me. High street retail is basically a do not touch with very few exceptions (city centres of tourist towns like Bath, Oxford, Chester, York)-- even in London, the High Street is just dying. If the government cracks down on Fixed Odds Betting Terminals, that's (conservatively) 1 in 10 or (my area) 1 in 5 High Street shops that will be just gone. Why are there so many mobile phone shops on the High Street, and is that sustainable? Coffee shops? Surely we are close to peak coffee?

What is the basis of the financial forecasts? In truth it means little or nothing if an accountant employed by them has reviewed it BUT the directors usually have to accept responsibility for the forecast. What happens if they only raise part of the needed funds? Do you get your money refunded? What fees are they taking out for doing this?

And if I was risking a significant sum, I'd want an accountant (and a lawyer) working for *me* to review the documentation-- the forecast and the contract.

Property development is just very risky. Much riskier than buying an already constructed property and renting it out. Planning is a big issue-- you can have your application knocked back at just about any stage. So are the site-- no one really knows what's under the ground until they dig it out (you might hit a Roman site, or discover the ground is too soft to permit a structure, or there's an underground river -- Reading for example is full of tunnels (some probably dating back to the Romans?) and that's become a real problem for homeowners.

And it's only a forecast. The returns promised are simply a promise, and their lawyers will have been pretty clear about that. And if you do have to sue them, what is there to sue? The Risk Factors of the documentation are always illuminating.

Who will control this project? Who is responsible for delivery? What happens if the construction is late (it always is) or over budget? What's the budget contingency? What fees are being taken out.

You can see why I'd rather buy a REIT or two ;-).

No free lunches. Buy To Let has come under serious tax pressure last couple of budgets (and may get worse). Talk to your accountant, I believe you could set up a company, and defer many of those costs. But you will have to do your own legwork-- managing a small BTL portfolio can be time consuming in the worst way (panicked phonecalls on Xmas Day, tenants doing a runner or trashing the place, etc.; what do you do when you find out the tenant has been doing Air BnB, the neighbours are on to the Council, the place is trashed?). BTW all these horror stories have happened to people I have talked to.

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