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  • Landlords in Distress

    Warning - Be wary when unusually high returns offered

    *Moderator note:  These two comments have been split off from another thread about a specific individual, as they are generically valuable in their own right*).

    Around 8% is the best return you are going to get with a sensible level of risk. The comparatively safest route is peer to peer lending or angel finance via something like http://www.propertycrowd.com which Simon Zutschi is involved in.

    Anything over that is total bullshit.  If 30% was achievable we'd all be doing it.

    Glenn Armstrong will offer you 15 and 20%  and often more than that.  He's currently being made bankrupt.

    Ben Rogers offered 12 and 15 and even 30% on projects that didn't exist.  He went under owing £2 million.

    Numerous other shysters will offer you ridiculous returns which seem too good to be true.

    Stand back for a minute. Engage your brain and ask yourself,  in an era when the bank base rate is 0.5%,  how is it that these really nice guys,  who only want to help you, can offer you 30% with no risk?

    And the answer is?

     They can do that because they are going to spend your money on cars, and holidays, and sex, and drugs, and rock an roll, and they have no intention of paying you back.

    The reason it sounds too good to be true is because it is.


    I will second what Bob The Dog has said above;

    If it sounds too good to be true then it usually is and should be avoided like the plague.

    Returns of 15%, 30% and even more that are sometimes promised to naive “investors” are quite simply ludicrous.

    The world's most talented investment managers and financial market traders cannot make guaranteed returns like that consistently. How will a small time property company Director/businessperson produce a better return on investment than the world’s best investment managers and business people?

    Is it simply fantasy to suggest that someone running a small property company in the UK is going to produce a better return than Warren Buffet or even beat the returns from a Stock market Index ETF with any consistency.

    Bernie Madoff ran the world’s largest Ponzi Scheme – his scheme was around 65 BILLION USD at the peak and Billions went missing or remained unaccounted for when it finally went bust. Some very wealthy and vey famous people lost a lot of money “investing” with Madoff.

    What did Madoff promise to convince all of these supposedly sophisticated investors to invest with him? A return of “just” 10% per annum compounded (perhaps that was his genius – don’t promise too much and it looks a lot more legitimate). This makes promises of 15%, 30% and more look even more ridiculous.

    Think like a businessperson before investing any money and do not fall for the wild and totally unrealistic promises of huge market beating returns.

    I also think it helps to think about how much work and how long it has taken to accumulate the money you are considering investing with one of these schemes. Do you really want 10 years, 20 years, 30 years of hard work, sacrifice, blood, sweat, and tears risked for the potential of a higher return?

    Do you really want to risk your inheritance which, after all is your parent’s or your grandparent’s lifetime of hard work and sacrifice, for the potential of a higher return? You owe it to your parents/grandparents to look after and nurture and grow that inheritance, not to risk it all for a highly risky market beating return.

    Even if you consider the money to be risk capital or “play money”, money you can afford to lose and not have any impact on your life whatsoever then why not just put it in an Index ETF (within an ISA wrapper for the tax free benefit of course) and forgot about it for the next 25 years (reinvesting all dividends regularly). The compound return will, on all probabilities, be astounding.

    Regardless of the above; The risk to reward ratio is way off with these schemes. You have the potential of getting an above market return (in some cases they promise 4 or 5 times the realistic return) but you also have the potential of not only not getting the promised return but of also losing your entire investment. That is not a good trade by anyone’s measure.

    My advice is that people should avoid investing with anyone promising way above market rates. Do not let greed cloud your judgment.