As humans we seem to instinctively want to find an easy way to make money quickly. Perhaps this explains why property spruikers continue to drum up business. But consumer regulators around Australia are warning about so-called property investment promoters who claim to be ‘wealth creators’ but who are really just in it for themselves.
Over 30 years in the money business, I’ve come across more than a few dodgy property investment schemes, and they are often marketed through free property seminars with invitations sent via mail, email or promoted on social media.
The details may differ however a common thread is often the grandiose claims of the people running the seminar.
As the government’s MoneySmart website notes, one property investment seminar featured “Four of Australia's greatest financial superstars”. Yet when our investment watchdog ASIC checked them out, none of the presenters had an Australian Financial Services (AFS) licence. In fact, three of the four speakers were found to live and work in the USA. Who knows what their credentials were?
If you do attend one of these seminars, be prepared for some high pressure sales tactics designed to convince you to invest in a property – often as selected by the spruiker.
You may be bombarded by claims of high capital growth backed up by inferences that the investment scheme is government approved.
More worrying, you could find yourself being encouraged to use your home as security to borrow significant sums of money to invest.
I won’t argue that a sensibly priced, well located property can be an excellent long term investment. But our consumer watchdog - the ACCC, is advising against attending these property investment seminars. Many ordinary Australians have suffered financial loss after relying on the unsubstantiated claims of a property spruiker.
And when you think about, if an investment scheme works so well, why don’t the spruikers use it to get rich themselves? The answer is painfully obvious. The schemes don’t work.
If you decide to attend a property investment seminar, look for the telltale warning signs - like being rushed into a decision, or enticements like discounts offered to attendees who sign up on the day.
If the spruiker also supplies mortgage broking, conveyancing and/or tax advice the alarm bells should definitely start ringing. And if you are encouraged to use your own home to fund the investment, don’t walk, run.
For more information on property spruikers, visit the MoneySmart website.
Paul Clitheroe is a founding director of financial planning firm ipac, Chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine.