ok i have recd numerous requests so now just putting it in summary - most are like small businesses - so they don’t meet criteria except Iberis for now - still doing dd on them and also speaking to other funds.
Few things worth doing are easy.
Pre-market developments are always problematic, I think. having dissatisfied people is probably just normal. I mean, you’re buying something that isn’t built yet. So you don’t know what you’re buying, really. Not surprising that people are going to disagree about whether what got built is really what you wanted.
Can PH afford to buy back properties? I’d guess that it’s like an insurance policy - in a normal market where there are only a few such failed properties then yes, but in the case of a massive failure of the broad market then no, and they’ll just let the entire company go bankrupt so you’re stranded. Me personally, I’d probably take that guarantee still, because if there’s a broad market failure, let’s face it, you’re probably screwed no matter what.
In reality most likely that business model does work. From what I’ve ever been able to tell, a fair bit of the costs of a rental property is the mortgage, or other cost of carry of the asset. The next fair piece is maintenance of the asset. If you don’t have to pay either one of those, your returns are going to be fantastic and guaranteeing a 4% yield and paying the management costs and paying for “insurance” to cover losses on failed deals in a normal market while making a profit is probably pretty damn plausible.
I would question whether PH is chipping in on the maintenance costs, or if you have to carry them. In other words, what does “net” really mean.
According to them, it just means that there is no maintenance cost, etc., but not net of tax. So, the IRR is 3%, not 4%. I wouldn’t hesitate to open a CD that paid out 3%. But this is no CD, that’s for sure. On the other hand, you do have key to an apartment.
If there is a broad market crash, which there could be, I’m very sure you are correct that there will not be anyone to pay anything back. I think a guarantee on the buyback is only as good as the legal system in Portugal even if the company is solvent and the market doesn’t crash. It’s really a question for a local lawyer, but I would imagine it would not be worth your while to sue anyone for failure to buy back a property irrespective of what the contract says.
I’m sure the legal environment of PT is good enough to make it worth going after a buyback contract, especially if it’s clearly stated. The one I’ve read is quite clear and unequivocal. I’m not THAT pessimistic.
I have seen that most of these PE groups will structure their assets inside SPVs. One purpose of this is to isolate liabilities and shift risks to investors. While you are probably correct that you could bring and win a lawsuit that is not a guarantee that you will be able to collect. You want to pay attention to which entity is guaranteeing the buyback and preferably they would have deep pockets.
I still am somewhat confused by this thread and it seemed to initially describe pooling resources to buy individual properties but now seems to be focused on using a company such as Mercan or Portugal Homes.
Of course you may find an entity that would take on the risk of guaranteeing 4% returns if they get the property at no cost and their only real outlay is time/labor (they have effectively excluded other expenses such as maintenance). If you assume that typical property management services run 20%-30% depending on the level of services, it is certainly possible that a company could come out much better guaranteeing 4% and probably ending up making 40-50% fees instead of 20-30%.
My earlier point was directed to the idea that this only really works where there is economy of scale for the company. I think they are less likely to guarantee returns on just a random building someone might buy which is what I thought this thread was originally about.
Yes i want to go with the property route and the biggest problem is that the properties are over priced and the agents will take side of the seller whom will pay him commission , plz consider me in , i will come to PT as soon as the visas are open
Both the attorneys and the services are receiving the same high commission in exchange for selling you an overpriced condo.
We have a pretty big group now. Big enough to buy out a small building. Let’s see what we can find.
Some of the group members are actually IN Portugal, so maybe we can find something that qualifies.
This group is growing in size! We now have 7 officially subscribed on WhatsApp. This is a good time for an explanation of what we do and where we are:
I think everyone is OK with a local real estate agent, but not with something like GV agents or our lawyers, who all take huge sales commissions and then sell something that is 30% over market (even after we pay them legal fees).
We have developer contact information, so we are working one by one to see what options we can get.
Please attest that you are not an agent or have any commercial interest when you DM me, and I will add you to the group.
Hi Peter: your proactive approach to GVP RE investing is definitely intriguing. How do i join the whatsapp group? Are you looking to get in before the July deadline?
Yes. That’s the idea. You can join by adding me.
Sorry I mean adding me on WhatsApp
La Vida has a similar arrangement, where they do (included) property management for the five years, and guarantee 4% (gross) of the purchase price annually, after the building is ready for tenants. They also include a guaranteed start date for the rental income, i.e. they can’t just delay completion for five years and say “sorry, still not ready”. In addition, they offer the option “flexible return” instead of guaranteed 4%, whereby they keep 30% and you keep 70% of whatever rent comes in. In that case, of course, there is no guarantee of any rent in months with no tenant. All this said, I have found them to be professional and reliable so far; and, I’d say the guaranteed rent starting at a certain point (by contract) incents them to complete construction and also to maximize rent throughout the term (since they keep everything above 4%). In other words, I don’t think it makes sense for them to let the apartment fall into disrepair, as that would make it more difficult to rent for a premium. Just a few thoughts; we’re still not set on who we’ll use if we proceed, but I don’t agree that guaranteed returns are a bad thing or a red flag.
Guaranteed returns are by no means a bad thing or a red flag. Quite to the contrary, they can be a great thing. What’s important is to look behind the guarantee to make sure that it is solid and the guarantor has substance, and that you are not sacrificing other important commercial terms just to get the guarantee (that is, if there is a guaranteed return and buyback of your original capital, that’s a pretty good deal; if there is only a guaranteed return, it’s important to make sure you’re not buying an overvalued property just for the guarantee.
Hi Peter, have been following your thread and was also sitting on the same proverbial fence regarding GV purchase. I would be interested in joining your WhatsApp group. Shall I just message your number?
I am interested!
Anyone who is interested, all users can add people to the group. You can reach out to anyone. I’m considering moving my focus from Portugal to Canada, and am going to ghost myself from this forum for a bit, but will remain active on WhatsApp!
but they 11pier even do have a proper website, so how did you communicate?
We have a potential deal pending. Please ping someone else on this thread if you want to join. Everyone had admin. I’m just swamped.
Hello, I am also interested in this initiative. Can anyone else (Adam, Victor, Olga, etal) who is in the WA group private message me, so I can send my number for adding to the WhatsApp group please?
Thank you in advance!
but they 11pier even do have a proper website, so how did you communicate?
@AdamS I have been communicating with their owner, you can message me for his contact details