Property Scams and the 13 Ways You Can Spot One

property scams

They’re suave, they’re slick and above all, they’re convincing, with their sales pitch down pat. Who are they? Property spruikers.

Unfortunately in Australia’s largely unregulated property advisory market spruikers – masquerading as experts – can flourish and their unsuspecting victims stand to lose a lot of money.

How can you avoid being preyed upon? We’ve identified some of the telltale signs of a property scam so you know when to run in the other direction.

 

 

This might come in the form of ‘special offer’ emails, cold calls from telemarketers or a letterbox drop. Or you might make the first contact yourself after seeing a seductive advertisement in a newspaper or magazine. Once they’ve got your contact details they’ll be persistent in their efforts to get you to sign up.

 

The spruiker will pull out all the clichés such as ‘offer of a lifetime’, ‘secrets’, ‘guaranteed growth’, ‘no money down’, ‘positively geared’, ‘get rich quick’ or ‘risk-free investment’. Many are unrealistic promises that a seasoned property investor can spot a mile away. But novice investors can be lured in.

Not all seminars are put on by spruikers, but this is a common way to target victims. You’ll receive an invitation to a free seminar, at which you’ll listen to a long spiel and be dazzled by a fancy presentation complete with glossy brochures, positive news story clippings, and detailed graphs and tables. Often they’ll either try and make you sign up for another – much more expensive – seminar or will book an appointment to talk to you one-on-one.

 

To earn your trust, the spruiker will be desperately trying to prove their credibility. They’ll have professional promotional materials, may associate themselves with reputable companies or charities, and will flaunt their own – whether genuine or not – success and wealth. They’ll try every trick in the book to get you to believe in them. Depreciation Calculator

 

This is the absolute giveaway sign that you’re dealing with a property spruiker. They’ll make it so easy by doing everything for you. They’ll provide you with a conveyancer, valuer, mortgage broker, an accountant and even a property manager. While this might sound perfect for novice investors, what they’re really doing is ensuring the deal gets done by taking control of everything. All of the supposed ‘independent’ professionals are part of the scam. They will have you signing on the dotted line before you can reconsider.

 

The purchase will require you to borrow against an existing property so you don’t get a valuation on what they know to be an overpriced home.

 

They’ll want you to sign on the dotted line as soon as possible, often under the guise of a ‘time sensitive’ opportunity. This is just designed to get the deal done before you have time to wise up and change your mind.

 

If you hear the term ‘rental guarantee’, alarm bells should be ringing. It might sound like a safeguard for an investor, but if a property is in demand by tenants why would you need the rent guaranteed? Chances are when the guarantee is up you’ll have long vacancy periods or significantly reduced rental rates. Or the guarantee will go by the wayside once the deal is done, as it won’t be worth the paper it’s printed on.

 

The person or company offering you this opportunity purports to be the only one with access to it. They’re choosing to offer it to you, for a limited time only. They’ll try to convince you that they’re the only people who can find you the right property. In reality you’d likely find a much better deal yourself.

 

The first thing a genuine, professional property adviser will do is find out about your individual circumstances before giving you options as to where and what to buy. They’ll consider your budget, goals, and whether you’re looking for a property that will give you capital growth or rental returns. A spruiker, on the other hand, will have a particular property they want you to buy from a stocklist. And unlike most real estate transactions, there will be no room for negotiation.

 

The spiel about the opportunity will often focus on the tax breaks it provides. While this is certainly a benefit of investing it shouldn’t be the primary motivation for buying. The main reason to invest is to build wealth. Depreciation Quote Schedule

 

Often the opportunity will be for a house-and-land package, with the promise of a stamp duty saving and bigger tax breaks through depreciation. You’ll need to compare the cost of these new homes with established ones in the area to ensure you’re not overpaying. Although you most likely will be.

 

They’ll go interstate to spruik to investors, hoping buyers won’t be familiar with the location of the properties they’re selling. These homes will often be in outer suburbs and in low socio-economic areas that may not have great growth potential, despite promises that they’re the next big ‘hotspot’. Ask yourself: if the market is so strong, why wouldn’t the locals be buying?

 

If you’re approached by what you suspect is a spruiker, before giving out any personal information – and hard-earned money – ask lots of questions to find out who they really are and what their motivations are.

Are they formally qualified as an investment adviser and how and what are they being paid?

While the promise of a ‘get rich quick’ scheme can be tempting, it won’t live up to expectations. If it sounds to good to be true, it probably is!

Property is an excellent vehicle to build wealth. Make sure to keep in mind that it takes research and education to get it right. It won’t happen overnight. It takes time and patience to grow your nest egg.

The best way to invest is to do the homework yourself to find the right opportunities. You should have a team of trusted professionals, including a finance broker, solicitor and accountant, to give you independent advice.