Inside Track File for Bankruptcy

The success of Surrey based Inside Track, the agressive off-plan property investment and investment seminar company, has come to a shuddering halt. The news, reported in the Guardian yesterday, will not come as much of a shock to insiders in the industry who felt the company's 'buying off-plan to flip' model of property investment was intrinsically flawed. It was generally felt that such a model works in a rising economic cycle, just about, but comes to grief when economic conditions are less than favourable, as has been proven to be the case. Even where the company claimed property could be let for a profit these claims were often without foundation, leaving many of its clients in large negative cashflow situations.

The company was the leader of a slew of 'property investment clubs' around the UK which promoted the purchase of off-plan city centre apartments claiming to have sourced from developers for reductions of 15-20%. Accusations have recently been made that developers were merely inflating their properties by this amount in order to offer the reductions, thus falsely inflating the market and leaving buyers with properties worth less than they paid for them. So 'successful' were these property investment clubs that they were responsible for up to 30% of all UK apartment sales in 2006, but then the wheels started to come off.

It would appear that, even in the good times, Inside Track's clients were struggling to achieve the profits claimed by the company. You can see an article on one of their 'clients' who ran into trouble here.

The announcement last month that the company was to cancel its controversial 'property seminars', which could cost potential clients anything up to £15,000 if they were to go through the full seminar course, was a sign of things to come.

If you've been burned by Inside Track and want to have a good moan about it you could visit here, it'll give you plenty of opportunity to vent your spleen.

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Ryanair - The High Fares Airline

Regular travellers will no doubt be wonderfully happy to hear that our favourite low-cost carrier has once again hiked its rates for luggage and check-in.

The company yesterday confirmed that passengers pre-booking baggage will now have to pay €10 - each way - the charge went from €6 to €9 in January. Those who have the audacity to use the check-in desk rather than Ryanair's online service (booking in on your PC before you travel to the airport) will now pay €5, up from €4. The charges are effective from next Tuesday, May 5. You'll find a full report here.

The airline has said the increases are "aimed at encouraging more people to travel with hand luggage only." It says it will continue raising fees until half its passengers check in online. Of course, once checking in online is the favoured option, the airline will no doubt charge for that as well.

According to a company statement: "Ryanair encourages passengers to avoid these charges altogether by travelling with our 10kg hand luggage allowance and checking in online."

Of course all of this has nothing at all to do with baggage. If this was logically an issue of 'weight' then passengers who are overweight should logically be charged more than those who are not. Don't be surprised if Ryanair do find a way to make extra money in this area though.

The real issue is, of course, the cost of oil. It has been soaring and Ryanair, having made a point of not raising money by charging fuel levies - unlike many other airlines in fairness - has to make up the shortfall somewhere. For those who wish to carry baggage, unfortunately you are the targets at the moment.

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Revenue Probes Overseas Property Purchases

It shouldn't come as a shock to very many people that the Revenue have decided they want to find the owners of property abroad so they can check where the funds to buy the property originated and ensure that full payment of Irish taxes has been made on this capital.

Frances O'Rourke in the Irish Times last week reported that an attempt by the Revenue Commissioners to inspect records in Savills HOK's Dublin offices for the names of people who have bought property abroad since 2002 ended when Revenue withdrew its request for information. Savills HOK then withdrew its High Court challenge to the proceedings. You can see the full piece here.

This week the Revenue has announced that it will take a different tack, looking to the Department of Finance to give it the power to access such client lists. Simon Carswell's full Irish Times piece can be found here.

There are two sides to this argument. On one hand it is difficult to argue against the Revenue having access to details of Irish investors purchasing overseas. The Revenue has a legal right to know the source of funds invested abroad by Irish citizens in case the state is at a loss in its tax take. It also has a right to know what income is being made overseas so that it can access any tax it is owed through this avenue.

On the other hand, Irish agents who are forced to give such lists to the Revenue are at a distinct disadvantage. Once such an initiative is launched, those wishing to hide the source of funds or even those who would rather that the Revenue didn't know about their business for less sinister reasons, will simply go overseas and use foreign agents.

The results of this will be twofold, neither of them particularly good. Firstly Irish agents will lose significant business, quite a few will go bust. Whatever you feel about overseas agents, there are many good, conscientious ones out there. They are perfectly entitled to make a living and this initiative could stop them from doing so. Secondly, those Irish investing overseas using foreign agents will be doing so outside any potential regulatory framework in Ireland making it far more likely that they will run into problems while doing so, and far less likely that they will have any recourse should something go wrong.

It is possible that the newly formed National Property Services Regulatory Authority (NPSRA) could be asked to make it obligatory for all companies selling in Ireland to present details of their clients to the Revenue. Unfortunately this would not make it compulsory for agents with no operations in Ireland to furnish such a list and would still leave Irish agents at a significant disadvantage.

Expect this issue to drag on for some time, it is very unlikely that agents will go down without a fight and the Revenue really wants to get its hands on those records.

For a list of advisory articles on taxation issues relating to investing in property overseas click on this link.

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Distressed Sales at Property Auctions

Auctions are the order of the day. Where ever you go in the world people are very keen to find properties using them. Are they correct in thinking that they'll pick up some wonderful bargains at them? Sometimes, but it's an awful lot more work than you might initially have entertained.

If you're prepared to put in the work and suffer the frustration involved, however, you might well unearth a gem. Be careful though, the success of auctions is based on people getting competitive and 'not wanting to let that property go for the sake of a few thousand'. And it works. You can see people getting caught up in the whole process and paying way more for properties than they are actually worth.

In this time of economic instability there are property auctions running across the world from Spain and the UK to the US. They are relatively new to the Spanish market, you can see an example here, but in the UK and US they are pretty commonplace. One company specialising in such sales in the UK is Pugh & Co. There is some info on Florida auctions here.

In Ireland we're more used to seeing auctions when people wish to sell 'unique' properties. At one stage a few years ago every property in Ireland seemed to have been 'unique' as most of them seemed to be selling at auction. Not now though, this fad seems to have passed and we're back to having only truly 'unique' properties in our auction rooms, usually sold individually.

In the UK and US the selling of hundreds, if not thousands, of lots at a single auction is far more common-place. Throw in a property slump and the numbers of properties involved rise significantly. That is where we're at today.

There is currently a lot of interest in the Florida market, our mother-site, www.OverseasCafe.com, calculates that it is now top of our search listings, beating France & the UK to the top spot. Most of the interest seems to be in what is termed 'distressed sales', basically people who are selling because they either can't afford to complete a purchase or can't afford to keep up mortgage payments on a property they've already bought.

As they say on Hill Street Blues "Let's be careful out there", just because a property is being sold cheap at an auction does not mean that it is worth the price or that it is value for money. By its very nature much of the property that comes to auction is rubbish. Rich people with high spec properties are far seldom found in need of the cash to pay their mortgages than poor folk, so it is inevitably property belong the latter category that is normally found at auction. Much of it is poorly built, in poor locations and comes with a lot of baggage. If you're going to buy property at auction you need to do an awful lot of ground work to ensure that what you are bidding on is actually worth what you intend to pay for it.

You will often find that properties that are actually worth investing in achieve unrealistic prices at auction because professional investors will know that they are worth money and there will be a lot of interest in them. The professional investors stop bidding once a realistic price has been passed and unfortunate 'mug' investors get caught up in the whole competitive auction process and end up paying over the odds for the property.
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Reclaiming overpaid CGT in Spain

This could be very interesting if you bought property in Spain and sold it for a profit in the last four years. I can hear the cynics say, there aren't too many of those, but, apart from the Costas the rest of Spain was doing fine up to 2007 so there may be some souls out there who made a profit ... and paid 35% Capital Gains Tax (CGT) on it.

Well, God bless the EU, they've said it's not on and those naughty Spaniards shouldn't have been doing this when their own citizens were only paying 15% CGT. So, if you've had to lose a chunk of your capital gain, you may be entitled to claim a chunk of it back from them.

According to law firm Costa, Alvarez, Manglano & Associates, investors who made capital gains by selling Spanish properties could be due tax rebates. Emilio Alvarez says, "Investors could be in line for a 20 per cent tax rebate because foreign non-residents were charged a higher rate than Spanish nationals - and that contravenes the European Community Treaty. Those who sold a home in Spain before changes to the rules last year were charged the Spanish non residents' income tax rate of 35 per cent on any capital gains instead of the Spanish flat rate of 15 perc ent. That means those affected can try and reclaim the difference from the Spanish authorities, plus interest". For more information, go to http://www.spanishtaxreclaim.co.uk

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Hotel Watch - The Reval, Vilnius

Vilnius has created somewhat of a stir in the Irish market over the past half dozen years or so. There are a good selection of Irish developers and investors involved in the market and, at three hours flying time, it is close enough to be a viable property investment destination. It also has plenty of flight access through Aer Lingus and Air Baltic which is important if you need to visit it on any kind of a regular basis.

The Hotel Reval is a tower block situated beside the river, within about a 15 to 20 minute walk of the old town. If the weather is good and you fancy the walk it is quite a nice one, but taxis are fairly easily available if you need to get somewhere quickly.

Vilnius itself is a beautiful city, the architecture, particularly around its extensive Old Town, is spectacular. It is, however, a summer destination unless you fancy the grimness of snow and freezing conditions that you'll find here in the winter months. I visited in early-April and the weather was a little chilly but dry and sunny.

You can pick rooms up in the Reval for about €80 on the internet which is bearable, and certainly better value than you'll find in, for instance, the Radisson Hotel in the Old Town. The acccommodation is basic business class, nothing to write home about, but the beds are comfortable, the showers are hot and work properly, the hotel is clean, there is satellite TV access, so all in all its got all the basics.

There is also a good breakfast included in the price. The back of the hotel is a building site at the moment and you will be awoken at 8am by the sound of construction, but it is bearable unless you're a very light sleeper.

All in all you'd have to say it is good value for money for a hotel close to the middle of a European capital.

For further information on the hotel visit www.revalhotels.com.

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Palm Springs Dubai - Damac Cancel Project

If you're one of the Irish investors involved in the Palm Springs development which was promoted by Damac in Dubai some years ago you may be interested in some of the following links. These go through the actual decision by Damac to cancel the project, Nakheel's distancing themselves from the Damac decision and investors reaction to the cancellation. There is also a fair amount on what investor's consider a derisory offer from Damac, considering the huge values they consider they should have made on their properties.

http://damaconcovered.wordpress.com/
http://www.gulfnews.com/business/Real_Estate_Property/10202845.html
http://www.ft.com/cms/s/0/d1c7fc18-0117-11dd-a0c5-000077b07658.html?nclick_check=1
http://www.kippreport.com/article.php?articleid=1105&day=5 http://www.arabianbusiness.com/515293-reason-for-axing-palm-springs-questioned
http://www.arabianbusiness.com/515467
http://www.arabianbusiness.com/515742-damac-hints-at-backtrack-on-palm-springs-axe?ln=en

UPDATE:

No sooner was this posted than the problem seems to have been resolved, or at least there is some hope that it will be. The following has been received from the Investor's group:

"This statement has come from RERA today,they are the Real Estate Regulatory Authority in the Emirates. Mounting media pressure and evidence against Damac have them under pressure to find a solution on their decision and we await good news!

Should this good news not develop The Palm Springs Investors group will proceed with legal action.

Senior Management from Damac have declared now that they will be in contact with a proposal no later than the 21st of April.

FURTHER UPDATE:

On mature reflection the Investors group have decided that this latest piece of news, which they've not received in writing, is merely a ruse by Damac to stop them protesting until after the launch of a new development by the company on April 13th. Hence, they state that their campaign of awareness raising will continue until they receive in writing confirmation that Damac are actually re-assessing their position on this matter.

SUCCESS:

It appears that the pressure put on Damac to change their minds about the cancellation of this project has reaped dividends as the company announced today (Thursday April 10th, 2008) that it would build the project as promised, but with some minor changes to the initial plan. You can read a report on the development here.

It would appear, therefore, that consumer pressure can exert change, even in the mighty Emirate of Dubai.
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For a selection of property in Dubai click here.

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Profit from the Pain in Spain

There's a nice piece in today's Independent (English version) about the level of pain being suffered by property owners in Spain. Of course, as we pointed out in a previous post, one person's pain is another's gain, so if you want a holiday home in Spain then the hour most definitely cometh.

The piece quotes Derek Blaney who says; "All the reasons people love to own in Spain are still there. It's two hours from the UK (also 2.5 hours from Ireland but this is a UK paper), the weather is great and it offers good beaches and all the amenities people like. But the market has changed and the people who will benefit most are those who want a holiday home, rather than a pure investment."

This last point is one well made. Spanish coastal property has never been a particularly reliable investment vehicle. Yes, in the early days, some people made lots of money from capital appreciation, but they were lucky. Relying on resort property for rentals is not a way to make money, in fact it is normally a way to lose it. If, however, you want a property for your hols and you particularly like coastal Spain, as many Irish do, then you should probably be keeping an eye on the market. There are bargains to be had.

You'll find the full Independent article here.

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Follow the Farmers - You'll Not Go Too Far Wrong

There may be an element of Irish society that looks down on farmers and the agriculture industry in general. A tendency, perhaps, to label the industry as being one that attracts only those who aren't qualify to do anything else - and there being a farm in the family, that was where they ended up.

Those active in the overseas property industry would seek to differ ... completely. In this industry farmers are considered to be some of the brightest, most daring, most innovative and, ultimately, most successful investors in the country.

Before any of the rest of us had even considered looking across the seas for alternative investment opportunities, the agricultural community were way ahead of us. You will find that farmers have been the bedrock of nearly every syndicate not launched by the financial institutions, and some launched by them as well. You'll find farmers, along with accountants, to the fore in launching, organising and running small scale, and some larger scale, syndicates right across the country - because they know the value of good quality commercial property.

Many of you will ask, why is this? It's simple - necessity is the mother of invention. The farming community, apart from those with huge farms, haven't been able to make ends meet for nearly 20 years now. Dropping commodity prices allied to rising input prices have meant that most farmers have found it almost impossible to make a living. Ironically, this is at a time when the capital value of these farmers has been soaring, as the price of land has gone through the roof. As I said, the farming community is not slow to harness their skills to sort out such ironies. Thousands of farmers across the country have borrowed substantial amounts of money against their farms, consequently investing it in 'off-farm investments', predominantly overseas property.

You may say, "sure it's easy for them, aren't they sitting on a fortune" but this would be to underestimate the risks they have taken. If their investments don't pay they lose their farms. And whatever Irish farmers will put up with, losing land isn't one of them. The upshot is that farmers tend to do their maths very asiduously before taking that leap of faith. They have a proven track record of being able to spot money-making property opportunities and go for them with gusto.

So the next time you see farmer Pat driving down the road in his brand-new top-of-the-range Toyota 4x4, instead of thinking "he's milking us all dry with his payments from Europe", you might consider "fair dues to him, fortune favours the brave."

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