Rental scheme income may have been seriously overestimated

I have it from a *very* reliable source that the rental income for the Medina Elvira complex has been grossly overestimated by Peninsula

My source has told me that 5% income will be impossible for a good few years, but will definately be obtainable after 5 years. As for 15% this looks like pie in the sky. When pushed, my source said 15% could be possible 'after 5 years' but didn't sound too sure about it. As my source was trying to sell me properties in the complex it was not in their interests to paint a bleak picture about this, so I believe these are reliable figures

From this it looks like anybody on the variable scheme will be funding their mortgage and running costs for a very long time before the property starts to cover its own costs

It also looks like the guaranteed scheme will never happen. If my source is correct then it doesn't matter who is running the 5% guaranteed scheme they will not make enough money to pay us this. Therefore the scheme won't happen. No company is going to take this on and then pay out 5% to everybody and make a huge loss, and if they did then they would go bust

Very interested to hear why you think the guaranteed scheme will never happen - what leads you to that conclusion

rgds

Deep

 

According to Sharon at Peninsula,with whom I spoke at length this week,there was no suggestion of the guaranteed scheme not being available.Valuations on the finished properties are coming in higher than purchase prices,apparently,so hopefully the picture is not as bleak as some are suggesting.

I have to admit that I do not fully understand the system but is it not the case that the valuations by Spanish banks will of course be equitable to the off-plan purchase price as they have a large number of bank guarantees on their balance sheets? 

Incedently - my estimates for rental were also grossly exaggerated - I have put this down to sharp practice - may I ask who gave you these figures.  Was it the developer or your agent?

 

 

If you would like your questions answering by ourselves or Royal Peninsula, please do not hesitate to contact us direct. My email is:- sharon@peninsulapm.com and Margaret Corley is mc@royalexecutive.com. Unfortunately, I do not have a "source" but what I do have is correct, valid and up to date information which you may find useful. Please remember that the 5% guaranteed rental scheme does what it says on the tin......it is guaranteed and underwritten.

 

Regards,

 

Sharon Hitchcock Sales & Marketing Director Peninsula

 

Opps I didn't have email notification switched on so didn't know anybody responded to this...

My source was a salesman at Grupo Balboa, the company that bought all of the land the Medina resort is building on - I was told they had taken Suites off Peninsula and are now selling them directly and they did this because they don't agree with the rental scheme marketing and that Peninsula's customers are unhappy with the rental schemes. They had an independant investigation done by OPI Rentals on how much rental income could really be achieved and this came back telling them the figures I originally posted. This is why they don't offer any form of guaranteed scheme - they believe they will make a loss on it. If this is true then the insurance company that underwrites the 5% scheme will make a big loss

Grupo Balboa is a much bigger company than Peninsula and you would imagine they are doing their homework properly. Also given that this guy was trying to sell me a property, why would he paint a deliberately bleak picture to a potential buyer if he didn't believe it was true?

I am sure right now all the companies involved in the guaranteed scheme believe it will turn a profit but given the recession and poor sales on the majority of developments (some of which are not building at all according to Balboa), the shopping centre won't be built for a good few years and rental yields will suffer due to lack of good facilities and the building sites surrounding the golf course. The resort is unlikely to make good rental return for the guaranteed tour operators until holiday makers can buy food onsite and have a half-decent choice of restaurants and facilities, and good facilities can't be built until there are enough holiday rentals demanding such facilities - catch 22. Poor sales and recession means it takes longer for the resort to get out of this situation than if the economy was in great shape and so the guaranteed scheme will make much less money than originally thought when it was drawn up a few years ago

Surely given this argument there is a risk that the insurance company backing the payments will make a serious loss, forcing them to either withdraw their product or increase the price of the insurance so high that the tour operators pull out. Without seeing the exact small print in all the related contracts then how can any of us be sure this scheme is going to work beyond the first year?

As a side issue, Balboa are selling Suites at an average of 20% below Peninsula's previous prices. This is also pretty alarming and throws doubt on the valuations Peninsula have got recently for Elvira 23

After talking to Gaspar Lino, I should point out a few points made in our conversation:

Peninsula are in a similar state of disagreement with Grupo Balboa about their marketing of the rentals, e.g. Peninsula believe they have it right and their schemes will be sucessful, and Balboa have got it wrong and are not offering good rental services. From the discussions I have had, both companies clearly believe the direction they are going in is correct. My comments about the viability of the guaranteed rental scheme offered by Peninsula are my own personal worries derived from the information I have right now, and not based on hard facts or legal documentation, which is why I made the point about needing to see the insurance policy that guarantees the money

Regarding the fact that Balboa are selling Suites at 20% lower prices than Peninsula, I have been told by Gaspar this is because Balboa have been increasing their prices by up to 35% during the sales period since the properties were released, and the 20% reduction simply represents a correction in their already inflated prices. He went to length to tell me that Peninsula have not been increasing their prices in this way, and I can say from some price lists I have obtained that on the whole this is true - prices haven't increased significantly over time on Peninsula's developments. However I haven't seen any previous price lists from Balboa to verify it they have in fact been increasing their prices or not

Don't know who Gaspar is,Lurker...but what advice have you received from Sharon Hitchcock,who constantly  recommends on this forum that we should contact her direct for up-to date information?

Have you taken her up on this?

We are all going to drive ourselves potty if we keep dealing with rumour,counter-rumour and guesswork from  various parties with conflicting interests.

I bought my appt through Peninsula so will contact them again to see what their take is on all this.No-one there,for instance,has told me that the shopping centre "won't be built for years".Sharon also insists the 5 per cent guaranteed rental is available,and until Peninsula say otherwise,I will have to take that as fact.

However,if you are right,and some of the facilities promised are not going to exist for some time,that will,of course,be a major cause for concern.

When I visited the site recently, all I can report is that the club house with restaurant facilities was (I was told) almost finished,the international school was open,gardens were being maintained,people were  apparently living on one of the developments,and the golf course was in use.

So while not pretending all is rosy, far from it,I really do think we need to get an independent but accurate  overall view of the

whole situation,rather than rely on conflicting information.

 

 

 

Please do not use what the agent who sold you the property tells you as gospel. a quick search on the internet of property for rental in the granada area will confirm that the rental figures were grossly over estimated. however if royal peninsula are giving a guarantee and have the insurace in place to back it up then it is worth considering especially in todays world.

like all things with these properties you will have to read the small print and make sure you are getting what they say you are getting.

donefor

Gaspar Lino is Peninsula's Managing Director so he should be a very good contact there

Just to clarify, nobody told me the guaranteed scheme would not happen, I was just worred it might get pulled if it brings in dire rentals. The guaranteed scheme is definately available. Gaspar said clients have signed up for it and it should be bringing in rentals from January 2009

The best way to be sure of the guarantee is to get a copy of the insurance contract that guarantees the payments and check the small print. I have asked for a copy but haven't seen anything yet. I won't make further comments about the rental scheme until I have seen this

Gaspar also told me the shopping centre is scheduled to start in quarter 1 2009 and will take up to 1 1/2 years to build

Well,actually,Lurker,with all due respect,it was you who said the guaranteed scheme wouldn't happen in your post of Nov 4!  You are right to worry,of course,but your latest post does also,I think,rather underline my point that if we listen to too many Chinese Whispers from people with conflicting interests, we are going to be worrying about everything to do with what was,and I believe still is,an excellent long-term investment.

Anyway,let's try to stay positive.....that's really good news that work on the shopping centre is due to start in  months rather than years,and that the guaranteed rental scheme is,indeed, up and running.Obviously,the insurance aspect needs to be confirmed,as with anything like this,and I will be getting my solicitor to do that if I decide to take up that  particular rental option for Tee 17.The variable scheme is clearly going to be a big risk at this stage......but I am presuming  that as Peninsula have been working on this for some time,they aren't just going to throw it all away without at least giving it a try.We shall see.

I will be going back to the site fairly soon,as I only live a couple of hours away..

Just as an add-on,I heard today from Margaret at Royal Pen re the rental schemes.She tells me they are sending out an update "newsletter" pre-Xmas. This,she says,will include the chance for buyers to use their own  properties for a holiday etc , even if they're in the guaranteed scheme..........or another property while waiting for theirs to be finished.   

Could anyone inform me of any updates on this thread -

Lurker you said that you were told that building on the shopping centre is due to start in the first quarter of 2009 - any news on this?

Seagull - did you receive an update letter pre-xmas - I didn't.  Please don't assume that if anyone has a view that questions the development of this resort that they have "conflicting interests" - I really think that everyone who posts on this forum wants it to be built, occupied and with great facilties.  I don't see many marginal environmentalist, anti-socialist, disgruntled farmers who have lost their cattles' right of way posting comments.

Of course the rental scheme has been overestimated - usually developers do this by charging inflated prices.  I don't believe this is the case with Peninsula.  They could not have forseen the dire economic situation we are in but I am sure many of us purchased on the back of guaranteed rentals.  The element of risk was spread in this manner.  Be sure to check your contracts before you sign and consider when you may get your first payment. 

 

 

 

This message was last edited by MrUnhappy on 1/21/2009.

I have just posted a reply directly to Mr. Unhappy although I do not have a property on this development, I do have dealings as such with rental schemes etc.  I would advise do not sign anything  re. rentals until al licences are in place and utilities have been connected and billed to you.  You are not allowed to rent out anyway without the habitation license and I think these rental schemes sound good because they seem very convenient and will save you the bother.  Wait until everything is sorted with your development first before proceeding because you might find you are locked into a contract with no way of renting out anyway if this makes sense.

I haven't heard from Royal Peninsula at all and certainly didn't receive any newsletter. I would very much doubt anybody has, Royal Peninsula are historically rubbish at keeping in touch or answering questions and I don't suppose that's ever going to change... sorry if you're reading Margaret but you really should do something about your customer service, like provide some...

Shopping centre due to start 1st quarter 2009 - I was told this by a Grupo Balboa salesman. As to if this is accurate information or a load of bull who knows? Even when they do build it I would say we won't get any shops until there is demand for them, which means enough apartments are lived in and renting for somebody to purchase or rent a plot in the shopping centre. So if sales and/or rentals are poor we will have to wait longer for shops and units may be sitting empty

Regarding contracts - has anybody seen the insurance contract that guarantees the rental income on the 'guaranteed' scheme? If this contract hasn't been seen by anyone then in my opinion then the guaranteed scheme does not exist. Simple as that. I have already asked for this contract from both Peninsula and Royal Peninsula and my requests have been ignored. If an insurance company is ensuring the income regardless of housing crash, rental problems, recession and everythign else going on, then there is a contract to be looked at. Nobody should sign up on guaranteed without seeing it

Good point about the insurance  Lurker.  But if you can find an insurance company prepared to underwrite a guaranteed rental scheme in a recession / potential depression, with a dreadful exchange rate, housing crash on an incomplete resort then please PM me the details.  My 97 year old mother is having some difficulties getting travel insurance as the driver of the "Athiest bus" as it embarks on its Middle- Eastern leg.

Also note that payments on the guaranteed scheme will be 6 months in arrears. So if the rental income does prove to be dire, and let's assume that an insurance company has agreed to provide the insurance, surely there is a risk the insurer will be aware months ahead of their impending payout loss and will use the 6 months grace period to find some legal clause so they can pull out and leave the rental company in the s**** with a lot of angry customers?

If we can't trust the mayor of the local council then i'm sure we can't trust an insurance company who's contract small print none of us have seen

Lurker you do have a right under law specific to the Anadalucian region to access certain information - in fact in many instances it should actually be given to you without your request.  I strongly recommend that anyone who has a cause for concern in this area has a look at this -

http://www.comply218.com/downloads/Decree218fulllegaltranslation.pdf

Has everyone been offered all of the infromation that they should have been by law?

 

 

 

 

This message was last edited by MrUnhappy on 1/23/2009.