If you’re as old as me, you probably remember the theme song to the movie “Love Story”, where Andy Williams starts by singing “Where do I begin . . .?”. After today I feel very much the same, having viewed some bold website promotions for what seems to be a new Central Florida development. This isn’t Festival, the one that I wrote about recently, it’s another community that’s emerged recently.
- Fantastic returns
- Unique facilities
- Fantastic rental options
- Both full ownership and fractional ownership (or co-ownership) packages (by the way, contact us if you need help to understand how fractional ownership works)
- The guarantee of a 200% re-sale price in a few years (some sites use “assured” instead of “guaranteed”, some quote “up to 150%”, all for the same place)
Ok, there are a lot of “fantastic”, “unique”, “exclusive” and other hyperbolic words that you can choose to downplay or ignore, like many of us have learned to do when the advertisement seems just too good to be true. So other than that, what’s the problem with all of this? Isn’t this just sales hype, nothing to be really concerned about?
Well, the problem is that we’ve been here before, haven’t we?
Ten years ago, during the property frenzy that was the Central Florida market in those days, some “creative” people started selling vacation homes here and made a fortune with rental guarantees, real estate guarantees and every variation on the guarantee theme that you can imagine (plus a few variations that I bet you can’t come up with, I know that I couldn’t). Many of these “creative” people spent a lot time marketing Florida property to potential UK buyers and the latter too easily believed the marketing presentations. Like proverbial lambs to the slaughter, they often believed what they were told because it was what they wanted to hear, and it was an expensive mistake for many.
Some of the guarantees/assurances evaporated rather quickly, even before the property “bust” of 2007/2008. I don’t know of any that survived that property price crash. All of a sudden, the builder, developer, property manager or anyone with the buyers’ deposits went missing or bankrupt. I personally received phone calls and e-mails from (mostly UK) people who had been sucked in to the scams and who were phoning round to find someone to come to their rescue. As a UK expat, it was quite depressing to see how successful some individuals were at talking the naive and unwary out of their money.
Of course, I’m not suggesting that this latest promotion is anything like those earlier schemes (!!!) but in 2014, does anybody really believe that a “guarantee” is worth relying on? Really? Are memories so short or are people still so careless?
Let me give you two things to use when you want to evaluate this type of offer, one from a very elevated perspective and one that could be considered trivial but about which you can make up your own mind:
- The elevated perspective: the US Securities and Exchange Commission is regularly concerned about the the integrity of schemes that seek investment from the public. Take a look at this web page of theirs and please commit to memory the phrase that says:
We’ve devoted whole podcasts to telling you to run, not walk from people who tell you a high return is “cant miss” or “guaranteed”.
That’s relevant not just for an investment in shares – it applies to any sort of investment. If ever you were in doubt, you have now heard it from people far more elevated in life than me!
If you still need more, read this web page before putting any of your money into a scheme offering investment returns (in particular, read the first “red flag” starting “High investment returns . . . “). Or this one, which has some disturbing parallels with things under discussion here . Convinced of the need for caution yet?
- The second consideration: here’s where we get to the “by the sea” issue. One of the sites promoting this latest scheme uses property photos from model homes (“show homes” if you are in the UK) of a local builder. I know the company very well and I have sold more than one of their homes. This builder is in Central Florida, about 1-2 hours from the coast. And yet, among all of the photos used to publicize the properties is one prominent picture taken from a balcony and showing the beach and the sea below. Even though in reality it is fifty miles or so away from the homes being promoted. My immediate reaction is that, if they are so careless or ignorant or inaccurate about the homes that they are selling, does that suggest the same low level of care or knowledge or accuracy about the whole project?
So what should you take away from all of this? Just remember to be highly cautious before paying out any money whatsoever.
Ten years ago we saw several enthusiastic property developers come into town with many promises and leave with buyer deposits after building nothing. “Buyer beware”, indeed!