Investment Property Scams

June 02, 2016
Julie Browne

Every year, there are a number of news articles published on the subject of “Investment Property Scams”. Even though this issue has been highlighted by journalists and even the Australian Securities and Investments Commission (ASIC) & Australian Competition and Consumer Commission (ACCC), it is not easy for an ordinary investor to sometimes distinguish between what is a “good” deal and what is a “true” deal.


Knowing how to avoid making costly mistakes in property investing is just as important (or probably more important) as learning about the different strategies of creating and accumulating wealth through property. After all, properties don't come cheap and often cost several years' worth of income.


However, the unfortunate truth is that there are so many product and commission-focused companies out there looking to flog as many properties as possible onto unsuspecting Australian punters, often taking shortcuts without the slightest duty of care.


The Australian property investment industry remains, to this day, unregulated and dangerous for a lot of investors. And whilst there have been many times where notorious property scammers and spruikers have been brought to the public eye or even sentenced to jail, the unregulated nature of the industry means that these people can pop up again in a few months or a year, with a new company, maybe a different format, but the same old modus operandi. The best way to stop their schemes is to not fall for them in the first place and know what to look out for.


The most common scam involves property marketing companies, operating under the guise of investment groups or clubs, selling properties on behalf of developers, usually to first time investors and for much more than they are worth. Far too many people seem to think that property investing is way too difficult for them to do by themselves. And so they flock to “free” property investing seminars in an attempt to educate themselves a bit more about their options.


Property marketing companies pursue investors through telemarketing, letterbox drops and newspaper advertisements, or through competition prize draws. If you are deemed suitable, you are contacted and asked about your financial situation. If you are found to have enough equity in your family home, you are usually invited to the company’s office for a meeting. Once there, you might then be taken to look at the property, while back at the office the buying contracts are being drawn up so they can be signed immediately. Unfortunately, most of the time, the property that is being spruiked to an investor has been overvalued.


It is wise to remind yourself that if something sounds too good to be true, it probably is. If there were really massive discounts to be had on dream properties, why are you only hearing about it from a pamphlet in your letterbox? Or in a cold call from a telemarketer? Most pitches will be peppered with emotive language that’s designed to fuel an investor’s aspirations. Scammers are very well practiced at manipulating people; they will play on your emotions to coerce you into parting with your savings. Be wary of any spiel that mentions your children’s future or their education costs, your financial future, wealth creation, retirement security and the like.


The only way to experience major success in any type of investment is to do the hard yards. When you’re buying property through traditional channels, you consult with lots of different people and get their professional advice. You might see a real estate agent, a lawyer, a lender, perhaps your accountant. Diligence and thorough research are the foundations for making money in any field and property investment is no different.


Even if you do attend a property investment seminar to build your knowledge, do not let anyone pressure you into making decisions about money or investments. Do not commit to any investment at a seminar where the atmosphere can be charged and exciting. Investment decisions should only be made after a lot of thinking and after seeking independent advice.


You can also check with ASIC (https://www.moneysmart.gov.au/scams) and the ACCC (https://www.scamwatch.gov.au/) to see if they have taken any action against the seminar promoters or their schemes.


For information about your property goals & aspirations call our office on 08 8342 5688.

We can have a confidential no-obligation discussion to guide you through your investment strategies without getting scammed.

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Posted in: Property investment

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