Congratulations go to Guardian reporter Tony Levene for investigating the background to Inside Track.
Experienced property investors had been waiting for some time for the wheels to come off this organisation.
Champion of buy-to-let boom succumbs to credit crunch
· School for ‘property millionaires’ collapses
· Mortgage famine hits sales in UK, US and Spain
- The Guardian,
- Tuesday April 29 2008
- Article history
The following correction was made on Tuesday April 29 2008
In the article below we referred to membership of a “property club”, run by Instant Access Properties, which came “for further payments of up to £110,000″. This should actually have read “up to £10,000″. This has been corrected.
Inside Track, the company that spearheaded the buy-to-let investment boom, is to go into administration early this morning. The demise of the firm, which once promised to show customers “how you could give up work and be a property millionaire instead”, comes as buy-to-let mortgages dry up amid tumbling values for British new-build flats, Spanish apartments and Florida homes.
Inside Track blames the credit crunch for its collapse as banks tighten up on buy-to-let lending, effectively ending 100% loans. Profits for the group three years ago were as high as £12m, but internal management accounts for the nine months to January 31 this year show income of just £239,000, with a £97,000 loss in January alone.
Its attractions had started to wane before mortgage rationing, as critical attention in the media – including the Guardian – focused on “minus millionaires”, customers owing banks more than they could afford as promised rental yields failed to materialise and property values started to tumble.
Inside Track Seminars, which labelled itself “Britain’s biggest property investment company”, was set up in 2002. It specialised in holding “free workshops” at hotels across the country. Lasting about two hours, these painted a world where anyone could become a “property millionaire”. But it was a model that depended on a rising housing market.
Founder Jim Moore, who spoke at the early seminars before moving to Spain, told prospective investors they could “start from scratch, live on easy street instead of struggling for a living”. As house prices soared, it was a message that attracted an increasing number of wannabe property millionaires. Although the workshop was free, it was a taster for a weekend seminar of “property investment education”. This could cost £2,495. Those attending were then offered – for further payments of up to £10,000 – membership of “a property club” run by an associated firm, Instant Access Properties.
The main Inside Track thrust was buying “off plan” – purchasing properties for a small down-payment, often years before completion. Investors were then told to sell before the property was finished, taking advantage of an expected rise in prices. This was known as “flipping” and landlords were encouraged to re-invest the profits into more off-plan purchases.
Prospective landlords were promised expertise and due diligence. But in March 2006 a London court was told that Lorraine Captan, Moore’s then sister-in-law, who was “taken on to source properties had no contract and no experience. She was not a professional valuer but a newcomer to the property process.”
By 2005, amid talk of a stockmarket flotation, Inside Track’s overall pre-tax profits hit £12.1m. It is difficult to calculate how much of that came from the company itself due to intra-group transfers. In 2006, group profits fell to £10.8m, then there was a steep slide in 2007 to £6.9m.
In documents filed at Companies House, the directors state: “We are aware that the risks to the company’s ability to trade are impacted by the general economic environment, the current housing market sentiment, and the lack of liquidity in the financial markets.”
In early March, Inside Track announced it was ending its workshops as interest in buy-to-let diminished. The last seminar, at Warrington this month, attracted fewer than a dozen people. Attendance at workshops had fallen from 31,722 in the year to March 31 2006 to 25,265 in the following 12 months. More crucially, those who converted to paying seminar customers slumped by a third from 5,917 to 3,834.
The shares of both Inside Track and Instant Access are held by majority shareholder Pearson Foundation, based in Panama, and three Isle of Man trusts including one designated for Jim Moore and his former wife Kim.
Instant Access is, for accounting purposes, the company into which trading figures for Inside Track Seminars are consolidated. Instant Access is not subject to any administration order and will continue trading as normal for its members, as will the group’s in-house mortgage broker, Fuel.
Descent and rise
Jim Moore, Inside Track’s founder and substantial shareholder, first came to prominence in the late 1980s for his role in L’Arome, a pyramid-selling perfume company. After a lawsuit brought by Chanel, L’Arome went bust, owing £6.5m and leaving 180,000 distributors with unsellable scent. He was, he said, “broke, massively in debt”. A decade later, he rediscovered his ability to galvanise with promises of quick riches through Inside Track. Moore earned millions from selling the buy-to-let millionaire dream.
In 2004, his marriage to Kim broke up. The couple have since been arguing over a settlement. Today, a court will announce that the former Mrs Moore has been awarded £15m.
Link to original Guardian article
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