We review Invest in Rooms – unregulated care home investment paying 10% per year

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Invest in Rooms offers a range of unregulated property investments. At time of writing it is promoting a care home investment which offers returns of 10% per year “guaranteed for 25 years”. The offer includes a commitment to buy back the room after 6 years for 110% of the initial investment, with the buyback rising to 125% after 25 years.

Who are Invest In Rooms?

Stuart Gibbons
Invest In Rooms managing director Stuart Gibbons

Invest In Rooms’ “About Us” page lists as its first director Stuart Gibbons, who modestly describes himself as “Sales and Marketing Director”. I say modestly because Stuart Gibbons is, in reality, the managing director and defacto owner of Invest In Rooms, which is how his LinkedIn page describes him.

Companies House shows that Stuart Gibbons was initially the director and owner of Invest In Rooms Limited. He then passed the directorship to a Mrs Janet Gibbons in 2014 and the shares in 2016.

Invest in Rooms’ last accounts to 31 December 2019 claim that it was a dormant company at that time – which is odd as its website was certainly active in 2019.

Gibbons is also the owner of Millbak Limited, an unregulated investment promoter. Among the investments previously promoted by Millbak are Colonial Capital (collapsed), Dolphin Trust (in default) and the Bar Works Ponzi scheme.

How safe is the investment?

Invest in Rooms claims returns from its care home investment are “Guaranteed for 25 years”.

On its About Us page it repeatedly and misleadingly compares the returns offered by its high-risk investment with deposit accounts. It also nonsensically claims that “pensions produce zero to 1% average return”. (A pension produces the return of whatever it is invested in.)

Thus enabling investors, both cash and pension fund holders, to invest in one of our property investment opportunities. Why would they do this? Pensions produce zero to 1% average return, and bank interest is circa 2% pa – our developments produce average of 10% pa over 50% ROI.

Result – a bigger pension and for cash investors far better returns than building societies or banks.

It rambles on:

How can an investor receive a return that benefits them? Certainly not from a bank or building society. Shares are a risk unless you’re the broker and we ALL know property is the key. But buying a house, renovating, dealing with builders, architects, planners and then tenants can all be a nightmare.

Will the house go up in value or could it go down?

Care homes – and rooms in them – can also go up and down so what point Invest In Rooms is trying to make here is unclear.

The fundamental issue is that investing in one of Invest In Rooms’ care home rooms is an investment in Invest In Rooms itself, not in property, as if Invest In Rooms fails to generate enough income from your room, you are relying on Invest In Rooms to pay your income. In other words, it is an investment in a micro-cap company which was dormant as of December 2019.

As the secondary market for care home rooms is almost non-existent, your returns are also dependent on Invest In Rooms’ commitment to buy back your room from the 6th year onwards, which will depend on their financial state at that time.

Should Invest In Rooms run out of money to pay the 10% returns or buy back the rooms and default, there is a significant risk that investors will not be able to sell their rooms for as much as they paid for them to a third party. A room in a care home to which the care home owner controls access is a very different asset from a buy-to-let flat to which the investor controls access.

In the extreme case, the investment in the care home room could be worthless if the care home shuts, meaning the room generates no income, and nobody is willing to buy out investors who own leases on individual rooms in order to take it over.

Investors relying on the “guarantees” provided by Invest In Rooms should hire professional due diligence specialists (paid by themselves, not Invest In Rooms) to confirm that in the event of a default, the assets of Invest In Rooms would be valuable and liquid enough to compensate all investors. Investors should not simply rely on what Invest In Rooms tells them about their assets.

Should I invest in Invest In Rooms?

This blog does not give financial advice. The following are statements of publicly available facts or widely accepted investment principles, not a personalised recommendation. Investors should consult a regulated independent financial adviser if they are in any doubt.

As with any investment in an unlisted micro-cap company, this investment is only suitable for sophisticated and/or high net worth investors who have a substantial existing portfolio and are prepared to risk 100% loss of their money.

Any investment offering returns of 10% per year is inherently very high risk. As an individual, illiquid security with a risk of total and permanent loss, Invest In Rooms’ care home rooms are much higher risk than a mainstream diversified stockmarket fund, let alone cash accounts.

Before investing investors should ask themselves:

  • How would I feel if the investment defaulted and I lost 100% of my money?
  • Do I have a sufficiently large portfolio that the loss of 100% of my investment would not damage me financially?
  • Have I conducted due diligence to ensure Invest In Rooms’ “guarantees” can be relied on?

If you are looking for a “guaranteed” investment, you should not invest in leases on care home rooms with a risk of up to 100% loss.

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