Updated: Jun 6, 2019
We have all heard that saying right? Well, here is a story that any property investor & real estate professional might find interesting. A couple of years ago we helped James with one of his property businesses (we will not disclose the company name, you will see why, please read on.), over the course of 6 months we established an office in UK, secured first 5 contracts and started actively selling James’s product. One day James mentioned that he had invested in a development in Manchester and he was not happy… As soon as he said “Manchester” and “not happy” we asked if by any chance it is the AngelGate development? For those of you who are not familiar with the “amazing investment opportunity” here is an article that will shed some light.
Having worked in property for 14 years, mainly focusing on developing properties in Germany and UK, you get to know agents, landlords, land owners and local developers. Lets just say that not everyone is transparent and above board. Hence, we pulled out of real estate in 2016 as it was getting ridiculous. The amount of people trying to offer you “the best deal you can find” that 9 times out of 10 turned out to be very, very far from the actual situation. Thankfully being seasoned business people that have seen interesting scenarios we know that Due Diligence & KYC is the first thing you need to do. Always! Have a lawyer by your side who can help you navigate through the paperwork and tell you what to be careful with. Money paid to the lawyer will be a fraction of the money you can loose by trusting the investment opportunity and people selling it to you.
James is just one of many investors who fell for the pitch. A reputable, market leading real estate investment broker sold him Angelgate as the next big thing. There are hundreds if not thousands of such brokers in UK that unfortunately are not regulated. They claim to do full DD & KYC on every single developer & development they sell but based on our personal experience most of them have not got a clue what they are actually doing. We could mention at least 4 different occasions when such brokers were trying to take our money. But let’s leave that for another article. Be very careful who you deal with, these brokers have no experience, no licences and most importantly no obligations. How it usually works: the investor puts down a £5,000 GBP deposit that the brokers keep (technically it is minused off the total deal value, so you will be told). Then, you get a call from the developers solicitors asking for your solicitor details, you are pushed to exchange contracts in 2 weeks, when the first payment of 50% (of the total deal value) is due. Depending on development completion date, usually it will be 12-24 months, second payment is due 2 weeks before completion. Almost forgot to mention that investors are guaranteed 5-8% assured yield for a year or two. The developers usually claim that yield will be paid even if your unit is empty over the assured period. Guess who is paying you the assured %? You are. From the money you pay to the developer, remember 50% x 2? Hard to believe? You just read how important DD & KYC is, so go on, please do your research on this subject and see if we are right or wrong. So, by the time investors and their solicitors "wake up" the developer has had their money, at least 50% of it, for 12-24 months... A lot can happen over that period of time. For example the developer can declare bankruptcy.
We are glad to hear that SFO are now investigating Angelgate, we hope that this will set an example to investors like James. Do your DD, follow your money and be smart.
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P.S. Might be a bit negative for our first blog, but business is not always a walk in a park and we want to share stories that will add value to you and your business, also save your money. We are here to help individuals and businesses achieve their goals, the right way – transparency, efficiency & productivity.