Saturday, December 8, 2007

The Guaranteed Rental Scam

Irish investors who have splashed out more than €30m on apartments in Turkey are seriously concerned about their investments after the company developing a massive property scheme defaulted on payments guaranteed under rental agreements.

It is believed that up to 500 Irish people have invested in Bodrum's large-scale Orient Palace complex, situated in a Turkish resort popular with Irish holidaymakers.

Most of the sales went through three Irish agents, Astute Property International, Remax, Tralee and Turkey Realestate Direct.

"If I was the one with the bucket and spade I would be worried," admitted Paul Egan of Astute Properties in Leixlip, Co Dublin, who has marketed 90 apartments, some costing over €100,000. His office admitted that it had been receiving "a lot of calls" from concerned purchasers.

Mr Egan, who has had emergency talks with directors of the development company in Germany believes, however, that "the only logical outcome is to complete the site," at a cost of some €30m.

The project has become bogged down by changes in Turkish law leading to serious delays in the granting of title deeds. The developers, as a result, refused to release money to the builder, who is now refusing to complete the work.

Only 40 per cent of the development has been built, leading to further concerns among purchasers, some of whom paid the full asking price to buy their 'dream home' off the plans.

Mr Egan, whose wife is Turkish, said that he has received personal assurances that the developers have lodged sufficient funds with a Dutch bank, and in notary accounts, to complete the development.

The developers are in "partnership" talks with another investor to secure the funding needed to complete the complex, according to Mr Egan.

One of the selling points on the development was that investors buying apartments in the Bodrum complex were guaranteed a 10 per cent annual return.

In other words, if they invested €60,000 in an apartment, they would get an annual rental payment of €6,000 -- after running costs.

This has been described by some sources in the foreign property business as "an incredible deal" and a "no brainer", given that interest rates for borrowers are as low as 4 per cent.


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