hammersteve:- I have bought on Ponta Bicuda. The deposit is only 40% before completion, which is a lot less than most developments, although this may change(So get in now) it happened at Ponta Preta in Sal. The rental guarantee is handy if you do not want the hassle of being a landlord. Its not due to be completed until late 2009/early 2010 so by that time its pretty certain direct flights will be in place.
I’ve just picked up from Savills that the 5 year rental guarantee deal from the developers is tied to a 10-year lease-back contract. In other words after the first 5 years you still have to leave the property in the hands of the hotel group for renting, but seems they do not have any obligation to you regarding level of occupancy and therefore the amount of income you will receive is in their hands. This is a negative aspect of the deal if it is true, as, if occupancy levels fall, the hoteliers will surely want to see their 5-year guarantee customers satisfied first. Those in the second 5 year term will potentially just get what’s left.
Savill’s are sending me the contract so I can scrutinise it more closely, but if the above holds true this would put the owner at a potential disadvantage both in terms of rental income and in the attractiveness of the property as a resale item.
Will keep you posted – meantime maybe OT can shed some more light on the above.
Where you’re pedalling beats pedalling your wares
cyclefrance:- There are three options at Ponta Bicuda:-
Hotelier– Where you are part of the leaseback scheme(Thats what I have opted in, for a number of reasons).
Easy Living:- Where you have a choice of joining the leaseback scheme or not.
Home:- Where you cannot join the leaseback scheme.
There are pro!s and con!s in each of the above schemes, each investor will have different circumstances.
Thanks OT – I understand that there are the three levels of offer, but the general blurb on line and in the other Savill’s brochure doesn’t make it clear that the 5 year guaranteed rental deal has strings attached that mean that the leaseback is actually for 10 years – I think this makes the deal substantially less attractive.
Re Easy Living, that has been described to me as being hotel quality but without any rental/management/income deal – this is slightly different from your description. I ran my place in Spain on these lines arranging my own rentals – when you’re a few thousand miles away it’s not so easy, especially when there is a breakdown of anything – rental clients are looking for hassle-free holidays. You need a good manager on-site to take care of these matters.
So I am, like you, looking at the deal from the rental guarantee angle, but I am concerned that being tied to the letting company for an extra 5 years without any income guarantee is a big negative.
IMO, what any owner wouldn’t want is to be tied to a letting agent, seeing only 1% or 2% income return in years 6-10, not being able to do anything about it, having a re-sale hampered because of this tied situation, and also only being able to use the place for 4 weeks of the year, with strings attached to that occupancy as well. That adds up to too many cons, far outweighing the inital pros of the opening years.
I hope I’m over-reacting – we’ll see. It still looks good as a resort. I’ve yet to see the contract in detail – maybe there’s a few more pros in the details, like a rental buyback option that would leave the property free of any encumbrences if the owner wished to sell at a later date. I think it needs something to sweeten the bitter pill of the latter years.
Where you’re pedalling beats pedalling your wares
Looks to me as if there are better deals elsewhere. I suppose it depends on how long you want to wait till it actually starts and completes.
As to rental this resort will have to compete for customers with Sambala which will be at least two years in advance and with golf to offer at the same time.
cyclefrance:- The company building the resort sre builders, not hotel managers, so they will have to get hotel managers in to manage the hotelier. No company is going sign a management deal for only 5 years, they want 10 year+.
We are being guaranteed 5 years at 5%, you can even take it at the completion of your property if you wish, which works out at more than 20%(after tax). A lot of property in Cape Verde only give the rental guarantee for 2 years, pro-rated, i.e if your property is only let for 30 weeks instead of 50 weeks, you only get 3%.
You are looking at 8 years from now, how much is your property going to be worth, at least double what you have to pay now. You seem to be worried about getting ripped off between years 6-10, there will be hundreds of investors in the same situation who have invested now, who are not worried.
Is your 5% rental guarantee before or after maintenance charges?. Is it based on the purchase price of the property or the value at the time? If they are prepared to offer the 5% guarantee as a lump sum up front then that means it has been built into the price you paid for the property. Why not negotiate a 5% reduction in the price and not bother with the rental guarantee.
The 5% is before maintenance charges(Which are very low 50-100euros per month) and is based on the purchase price of the property.
I do not want to be a “Landlord”,and all the problems associated with being a “Landlord”, thats why I have went with the rental guarantee. After all Graham, I believe you have bought in Sambala, and look at the trouble(furniture) you are having before moving into your property.
Yes I have bought on Sambala and the furniture packs are something we have to sort but I feel long term Sambal will be a better bet. It will have the advantage of 2 golf courses, dive school, horse riding and many other facilities.
Although I have not decided one way or the other the Sambala rental Guarantee is 5% after all maintenance charges. As this will be the first resort open on Santiago and once direct flights start I feel renting will be very easy.
I also like the thought that I am helping to build schools and housing for the locals.
You are happy with Sambala, I am happy with Ponta Bicuda. They both have pro!s and con!s.
I’m progressing with my purchase plans, having spent a good while over Christmas and New Year researching both Bicuda and Sambala – and so far Sambala seems to be winning in terms of my requirements.
A the moment, the overall package is better-suited to my requirements – the rental income deal is set at 5 years with no open-ended follow-on period which I find more attractive in terms of risk vis-a-vis my financing arrangements. It also means that I can sell more easily after 5 years, not being tied into a 10 year lease-back.
Facilities and strategy are also more interesting as well, with extensive coastland and a wide range of leisure interests. It just looks and feels to be better thought through than Bicuda. I’m going to visit the Oxford centre next week so will provide a further update then.
On the flights side, Fly Astraeus looks a good bet to be a future carrier into Praia having already established Gatwick & Manchester to Sal weekly flights at around £375 return per person
Where you’re pedalling beats pedalling your waressal.oracleMember
I realise thats its a throw away line, but I have to pick you up on this:
“On the flights side, Fly Astraeus looks a good bet to be a future carrier into Praia having already established Gatwick & Manchester to Sal weekly flights…”
Why would Astraeus fly to Praia when you can already pick up an internal flight from Sal to Praia?
cyclefrance:- I have to pick you up on this also, after 5 years they have to organise another rental term. 75% of owners will have to agree to what is proposed, they will not be able to dictate their terms. There is a lot of pros and cons in both resorts.
As a matter of interest what leisure interest duse Bicuda have to offer?
Graham P:-Beach Club, Cricket Club, Tennis Club, Fitness Club, not to mention the restaurants, live music bars, hotels, shops. Also no traffic is allowed inside the resort apart from a shuttle, so you have walkways and cycleways.
Thats good then we will be able to organise some cricket games between each other. Might have to come to us for the golf though.
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