Fontana Residence, Cluj-Napoca

[Lsab]

Hi Pukanui

Have you contacted Obelisk with your figures?

I'm also buying on this development and have been worried almost from the start.

 

[Lsab]

I cant believe what I'm hearing here
Has anybody here, that has posted already, actually completed on a purchase including furniture pack, rentals etc already with this company.
Because all that I'm hearing is a pitch (company credibility pitch) that i have heard many time over from many different companies, indeed i used the same pitch myself in the past. By reading the post you would swear you have already sold the property and made money. !
Did anybody actually ask them about their commission. I bet nobody did. and why.........because they are too nice......!

Don't get me wrong i wish everybody the best with their purchases but just a bit taken back by the posts, I was just struck by feelings of naivety and impulsiveness from the posts .
I have to say that i too suffer from naivety and impulsiveness too but i can recognize it in myself now...................am i waffling
All im saying is that ye are being a bit to nice, i hope you feel the same way in 3 years !

I know this is an old post but the blinkers have been off for some time now. The better the pitch the less I'm interested! Actually I've lost all interest in property as an investment after being slightly singed once or twice and looking as though I've been well and truly burnt on this one.

Ah well - they won't catch me again!

 

[Pukanui]

Lsab,

No I havn't yet, but I was talking with one of the guy's there yesturday who actually tried to sell me another one!!! I asked if he knew that property prices had droped considerably he just kept going with the sales pitch as to why it is a good investment???

I posted this mail not to scare people to death but to hopefully bring it out in the open in order for everyone involved in this or similar developements to get their finances sorted.

Best thing might be to track local rent values over the next year and get a better idea of pricing? Also I might look into the option of arranging finance from the UK as the rates are quite high in Romania.

Do you think there anything we can do as a group to get a better deal from the developer bearing in mind we are under contract to complete?

 

[mickthepropertyguru]

I'm sorry to hear whats happened but any company that only deals in new developments and not in resales is a rip off.
But at least the development is going ahead, but more than lightly the rental yield will be nothing like what you anticipated.
But as I always say to myself "Well at least I have learned some good lessons". And i have learned many lessons

 

[Lsab]

Financing from the UK is not an option for us i don't think.

Hi Pukanui - Yes it might well be a good idea to approach the developer as a group. I realise that your post wasn't meant to scare and it hasn't. I'm at the 'what, again??' stage now unfortunately.

I'm in touch with one of the ex sales team at Obelisk so might bend his ear next week.

Hi Mick - yes its a lesson well and truly learned. And what I learned most of all is to keep out of property buying! I don't have the experience or the money.

 

[Richard_222]

Fontana may prove impossible to finance

Lasb & Pukanui - Romania and Fontana...

As you say Pukanui, I can deal with the fact that prices have fallen - as they have done in many countries - credit crunch proof, Romania may have been, but not immune from global recesssion. With the benefit of hindsight of course we would have walked away, but who was to know? But, I feel a fool for not looking further and harder and at independent figures - away from the brochure.

I've looked through your calculations, they're going to be almost identical to mine as I've bought a 2 bed also, to sum up your figures in words, what you're basically saying is we'll have to find a whole other lump sum on completion, as we'll only be able to borrow a smaller amount (LTV ratio),then we'll have subsidise the rent month-on-month probably until we sell, because the rental value appears to have been inflated in the sales pitch, added to that...we'll have to hold onto the property for a considerable time just to break even not only because prices have fallen generally but also due to the fact that we've paid over the odds - bearing in mind the out of town location.

I don't have a lump sum to add to the deposit paid and even if I did, would I want to throw what is seemingly good money after bad? Are you suggesting that we approach Obelisk or Platinum en masse? I'm not sure what this approach will achieve. Although having said that, I'm very happy to add my voice to any ideas that you might have re borrowing.

If all this is true, & I sadly suspect that it is, I may end up having to forfeit my deposit and just walk away. You say that we are under contract to complete - but looking at the contract, I think that after 30 days, most likely is that Platinum would terminate the pre-agreement keeping the apartment and the deposit (3.18) as if you haven't got the balance...well, you haven't got it.

Do keep in touch - we'll try to figure something out, otherwise it appears that I'm going to poking my eyes out too.

Richard

 

[Lsab]

Hi Richard and Pukanui

Once you've both made 6 posts we'll be able to communicate via PM (personal message).

Richard I've been thinking along the same lines as you - walk away and lose the deposit rather than plough more money in. I had intended to sell as soon as it was built so wasn't too bothered about the mortgage facility but now of course, who's going to give me the price I paid for it? At least I went for the cheapest option available but the deposit is not exactly a small sum to wave goodbye to.

 

[Lysos]

Lsab,

I think you are very wise to accept your losses; it may not indeed be a 'small sum', but compared to what you will have to pay to complete & then subsidise the mortgage, with no guarantee of ever getting back what you paid out, it will in time seem relatively small, and you will be able to sleep at night; move on !.

 

[Pukanui]

Financing from the UK is not an option for us i don't think.

Hi Pukanui - Yes it might well be a good idea to approach the developer as a group. I realise that your post wasn't meant to scare and it hasn't. I'm at the 'what, again??' stage now unfortunately.

I'm in touch with one of the ex sales team at Obelisk so might bend his ear next week.

Hi Mick - yes its a lesson well and truly learned. And what I learned most of all is to keep out of property buying! I don't have the experience or the money.

Hi Lsab,

Whats the name of the ex Obelisk sales person? I might also know him/her as well? With that said the two peoples who I have been dealing with over the past year have left so can assume there is a high turnover of employee's at Obelisk?

 

[David howe]

Accept there is a 99.9% chance you will not be able to get finance and then do careful due dilligence as to how you proceed before you expose more money or take charges at home.

Also bear in mind it will cost 7,500 euro to put a furniture pack in.



David Howe LLB. LLM

Hi Lsab,

Whats the name of the ex Obelisk sales person? I might also know him/her as well? With that said the two peoples who I have been dealing with over the past year have left so can assume there is a high turnover of employee's at Obelisk?

 

[Lsab]

Hi Lsab,

Whats the name of the ex Obelisk sales person? I might also know him/her as well? With that said the two peoples who I have been dealing with over the past year have left so can assume there is a high turnover of employee's at Obelisk?

I wouldn't want to give his full name but Steve C. If that helps! It does seem as though there's quite a turnover as Steve is the second person I dealt with. (If my memory serves me well, I think the first was Nick). Haven't spoken to anyone else since.

 

[Lsab]

Accept there is a 99.9% chance you will not be able to get finance and then do careful due dilligence as to how you proceed before you expose more money or take charges at home.

Also bear in mind it will cost 7,500 euro to put a furniture pack in.



David Howe LLB. LLM

INVESTMENT ROMANIA - Investment in Romanaia, Property management, Due diligence, Renting in Romania

Thanks David

Infact it wasn't something we were too bothered about as it was our intention to sell on completion of the development!

 

[Richard_222]

Rental yield was not overestimated

Hi Richard,

Hmmm what a difference a little under a year can make in the world of property investment!!! I, like yourself, gave this investment a lot of thought and of course I questioned the figures being quoted by Oblisk and searched the internet for answers to back up some of their statements on the economy as at that time Romania was being quoted as recession proof!!! My conclusion was that this seamed a fair investment even after discounting the profit figures being quoted. In hind-site I could have delved further and only after looking through the glossy brochure again I realise there are some things mentioned that deserved further investigation. (I will not the afore mentioned with a D'oh! as this post develops). But alas the clever marketing of Oblisk reassured me of any lingering concerns and I happily parted with the best part of £30k GBP.

Anyway, as I am sure you know this project is going ahead and I have been told that the Completion Insurance is in place so at least it will be completed. It sound as though it is on track for completion September 09 if not slightly sooner.

This information has prompted me to look into how the market is actuall doing in Cluj at the moment. I called a representative from Remax (D'oh!) who are the international estate agents quoted in Oblisks sales pitch as being the company who will market these for sale/rent upon completion. They informed me that property prices are down in Cluj by 20-50% with an average of around 35%. When asked if he thought the Fontana residence was value for money when launched (D'oh!) his reply was it wasn't and due to its distance from the centre of Cluj and lack of public transport and general population. Further more the developments which Oblisk used to show how cheep Fontana Residence was were closer to the centre thus justifiably demanding higher prices. Bottom line in terms of falling property prices the closer you are to the centre of Cluj the less the value has fallen.

When asked about rents (D'oh!) his estimation for a two bed furnished apartment was 300 euro's PCM. Yes thats right per month!!! Not quite the 5.5% yeld quoted by Oblisk???

Let me do a basic calculation using a formula which the banks use as the minimum criteria when approving a buy to let mortgage in the UK. (D'oh!)

Property price............ euro 130,000k
30% deposit.................euro 39,000k
70% LTV (mortgage)......euro 91,000k

Bank formula: Loan amount x interest rate % x 125% divided by 12 (months) and this should give us the magic number for the rent amount.

91,000 x 8% (average Romanian rate at present) = 7280 x 125% = 9100 divided by 12 = 758.33.

Hold on I must have missed something? hmmm x hmmm x hmmm div hmmm = Ohhh S**T!!! (D'oh) (D'oh) (D'oh). So how was the rent ever going to cover that???

Ok, now bearing in mind the current economic crises in the world I have to accept that it is not only Romania where property prices have fallen. In the UK my place have dived by £40K since this began so I won't be beating myself up too badly on that count. However this doesn't make the situation any easier to sort out. When asked if the end is in sight for a flattening of the Cluj property market Remax said that their research indicates March 2010. So if we estimate that by completion of Fontana in September 2010 properties in this semi remote area have declined by a conservative 35% the banks will obviously need to revalue the 70% LTV which we bought into.

So for my apartment the basic calculation works like this:

Purchase price.................. 130,000K
Revalued 35% less.............85,500K
70% LTV (mortgage)......... 59,150K
Leaving 26,350K + 14,500 (difference after revaluing excluding deposit) which I need to find upon completion. Add that to the 30,000K already invested gives me hmmmm + hmmmm + hmmmm = 70,850k Ohh S**T (D'oh) (D'oh) (D'oh).

Now having accepted that large pill does the projected rent now cover the new mortgage?
59,150K x 8% = x 125% = divided by 12 = 492.92 = Ohh S**T (D'oh) (D'oh) (D'oh).

So in summery for the rent to cover the mortgage and yes I agree that this calculation is more geared to UK landlord overheads which may differ in Romania but as a general view a loan of 35,000 at 8% will have repayments of 291.66 PCM. Meaning in my situation I will need to cover 95,000K of the purchase price on completion.

It would be great to here your views on this and potential solutions short of poking myself in the eye and claming insanity.

Pukanui

I wanted to add a comment about the rental yield projected by Obelisk. If you look at the the 5 year mortgaging investment scenario, the rental income is estimated at 18,900K euros - divide this by 60 months (i.e. 5 x 12 months) and you get 315 euros per month - pretty much the amount you said REMAX had quoted. Why then do the figures not stack up? It this because the interest rates in Romania are now so high, so that interest figure quoted by Obelisk i.e. 16,907 euros is now seriously underestimated? Do you know if that rate has seriously risen in the last year?

I think the missing information here is exactly how much the mortgage is going to cost. I've contacted several brokers dealing with eastern europe to try and compare some deals. If anyone knows of any helpful brokers to deal with, please do pass it on. I'll post a separate thread also - to that end. I'll get back with any helpful information re mortgages.

Richard