February 17, 2008 at 11:09 am #53657
Safe as houses? ‘This cost me £350,000’
One woman who bought seven homes for £1.1m discovered life on ‘easy street’ is harder than a mailshot promised. Tony Levene reports
When her marriage was on the rocks, Tamsin Barks knew her life needed new direction, and better financing, as she was about to be single again. Then she received an unsolicited mailshot from property investment company Inside Track Seminars. It said she “could give up work and be a property millionaire” and that she could “live on easy street instead of struggling for a living”.
Barks, a self-employed vet until her marriage disintegrated, had never seriously considered property investment until then. But instead of celebrating the property millionaire status Inside Track appeared to promise, she calculates the £1.1m portfolio of seven properties she invested in could end up losing hundreds of thousands of pounds.
Over the same time, the Halifax house price index has risen 32%. She reckons that if she had ignored Inside Track’s recommendations and bought local property via an estate agent, she would be some £300,000 in the black.
“I thought it was too good to be true. And I wish I had stuck to my instincts. But I was on my own, and vulnerable. Property investment seemed sensible, it was bricks and mortar – not some fly-by-night financial deal – and I could understand it,” says Barks.
“In the mailshot, Inside Track’s Jim Moore said it wasn’t about being greedy. So I went along to the free workshop, which convinced me to become a client and property investor.”
More than four years later, Inside Track is mailing out thousands of similar fliers each week.
“I can’t continue financing the portfolio I was recommended to buy by Inside Track’s sister company Instant Access Properties,” says Barks. “My combined rental income falls short of the cost of borrowing the money, and that’s before essential expenses. I am running out of money – I’m worried I could lose my home and have to live in a small flat or even a caravan.”
A consultant at Instant Access Properties, which is not and does not need to be regulated by the Financial Services Authority, recommended she buy seven investment properties – one in Manchester, two in Spain and four in Florida. Instant Access charged her fees for this advice.
“I was told I could make money within two years by a process Instant Access calls ‘flipping’. I would buy off the architect’s drawing [off-plan] by paying a deposit, then sell the property at a substantial profit to another investor just before the keys were due to be handed over. This was to be a process of no more than two years. I could then re-invest my gains in more properties which I could flip over again. I was told the sky was the limit,” she says.
Inside Track mailshots sent out this month state that “90% of new properties have already been bought and sold before they even hit the market. This is where the ‘easy’ money is made in property and what makes ‘inner circle’ investors so rich and successful”.
But, Barks says “flipping” to lock in profits before the flats were habitable did not work for her – she estimates the four Instant Access said she should “flip” are showing losses after financing costs and other expenses.
One of her flats, in the Duquesa development in Andalucia, has only been rented for four months. “The tenants moved out as it was like living on a building site. I was told Duquesa was a stone’s throw from the beach and by the marina. As it was off-plan, I bought it unseen. I now discover it’s 1.5km to the marina by road or an 800m walk.”
Financing her £1.1m investment costs around £5,100 a month. Some costs are in dollars and euros and fluctuate – they might have been higher but one loan has interest rolled up against the capital. She partly remortgaged her home, following methods recommended by Inside Track/Instant Access, to raise cash for deposits, furniture and other costs. Her rental income is around £3,600 a month before costs.
“There is a £1,500 gap. But it is really wider – this figure doesn’t include management costs, insurance, ground rent, service charges and energy bills,” she says. Barks estimates her monthly losses, plus decline in property values in Manchester, Spain and Florida, mean she is around £350,000 poorer than she might have been had she not heard of Inside Track.
“Inside Track says you can make money in all property markets. I have yet to see it. If Inside Track believes it can make money from my properties, why does it not reimburse my losses?” Last weekend she picketed an Inside Track workshop at a Gatwick hotel.
One of her Florida properties has been sold. “She made $35,000 (£17,920) gross profit on that,” says Inside Track managing director Anthony McKay. Barks agrees, but says he is ignoring the costs of buying, furnishing, maintaining and selling the flat.
The inside track on Inside Track
· Instant Access Properties (IAP), the parent of Inside Track, says its clients have invested in more than 17,000 units worth more than £2.6bn.
· Inside Track was founded by Jim Moore, whose career also embraced bust pyramid perfume scheme L’Arome which lost a landmark legal case in 1992 for trademark infringement brought by perfume giant Chanel.
· IAP is majority owned by Panama-based Pearson Foundation – minority shareholdings are held by Isle of Man trusts, including one designated for Jim Moore and his former wife Kim.
· Inside Track attracted 59,330 bookings at its free workshops – the first stage of its sales process – in the year to last March 31. Of those, 25,265 attended and 3,834 signed up for the paid-for weekend seminar. These figures are all down on the previous year.
· The latest available figures for the entire Instant Access group – to April 30, 2006 – showed turnover of £44.8m and pretax profits of £10.9m – a fall of £1.1m on the previous year.
What an Inside Track director says
Guardian Money asked Inside Track director Anthony McKay to comment on what Barks says she has lost. Here’s an edited version of his response:
“Her numbers are blatantly wrong. One US property showed a $100,000 gain in 2006; a second a valuation $112,000 above her purchase price in 2007. One has been sold at a gross profit.
The situation in Spain is challenging – we have advised investors this is the wrong time to sell. The phrase “stone’s throw” would commonly mean close-by – an 800-metre walk would fit this. We are working with her to sell the Manchester property.
We educate clients how to make money in a tough market by exploiting the pressures developers are under to negotiate keener deals. Her desire to sell runs counter to everything we teach. Property is a medium to long-term investment.
We really do want to help her and have worked well beyond any legal requirement to do so.
However, selling takes time, particularly to achieve the best possible price. We devote an extensive section to risk at our two-day seminars.
We do not invest client funds or recommend specific opportunities. Nor do we promise or guarantee any returns. We offer clients a broad range of potential opportunities from which to choose. We do not make this decision for them.”
February 17, 2008 at 11:56 am #78830
What can I say…Lambs to the slaughter…A fool and his money 🙄 I wonder if many others are in this situation.
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