<blockquote id="quote" class="ffs">quote:Originally posted by Snapper
<blockquote id="quote" class="ffs">quote:Originally posted by Katys Grandad
Just where does the OP mention how much he/she is paying or say that this villa is cheap? He's happy with the deal he's got and is simply asking whether, in the present financial climate, he can be fully confident that everything is above board and that he can be sure that he won't lose his deposit and that the property will be all he hopes it will be. The real answer these days is that, irrespective of price, nobody can rely on the sustainability of any business entity. Ask those who had money with Northern Rock, Icelandic banks, Woolworths etc etc etc...
Some posters seem to be saying that if somebody gets a good deal, it has to be dodgy! Perhaps the owner is simply trying to get at least some money coming in throughout what will be a very challenging market over the next couple of years. Who knows?[/quote]
You've sort of answered your own question here.
You see, the problem with Woolworths is that they too were only trying to get at least some money in. Let's face it ... they weren't exactly renowned for their premium brands now were they? That may work for one or two months, and it may work in an environment where cheap credit is readily available (and no, cheap credit is not that readily available for Orlando villas despite what you might read as the headline rate from the Fed Reserve). The problem is that for any business (and a rental villa is a business no matter what anyone else tells you - if you don't believe me, check with the IRS) if they take less money in revenue than they spend in costs they go bankrupt. That's the reason the Northern Rock went belly up. That's the reason Lehman Brothers went belly up. That's the reason Woolworths went belly up, and XL Airways, and Whittards, and every other company that has vanished this year. Just to be clear ... they went bankrupt because they weren't charging as much as they were spending.
Villas cost a small fortune to run each year, and a large fortune to run and keep in good condition. Any owner who doesn't charge enough is heading for one end point. It isn't avoidable, and sadly the US and UK governments aren't likely to bail them out the same way they are with the banks and car industries.
As John has identified above, if owners aren't bringing in enough revenue to cover their costs they start cutting corners.
And also as John notes, it is wrong to say that all cheap villas are dodgy ... because there are some that aren't. At the moment. At least for now. But the clock is ticking. Personally, for my holiday, I wouldn't take the risk ... but we're all grown ups and have the freedom to make our own choices.
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Uhm, I think a lot of your arguments here are very flawed. Lots of businesses can and do survive a very long time without making a profit, very few businesses go under because of lack of profitability, it is cash flow which always get them. As soon as they run out of cash or price themselves out of the market it no longer matters how profitable or wealthy they are.
Some of the most cash generative businesses are the lowest price ones, i.e. if you look at retail (the examples you quote) then many of the discount retailers actually have the strongest cash flow. They turn product quickly and cheaply and as a result, their asset turn is very high and they can deliver very strong returns. The retailers who have the highest margins tend to be jewlers and you see them coming an going far more than discount retailers. Woolworths was around for 100 years (not a bad business) and I would say that it was poorly ranged product sold at the wrong price which caused their downfall, not the absence of premium brands which their typical custo