Property spruikers: when the tide turns, the sharks come back to feed

It’s the same for every property cycle. As the market wanes, the property spruikers retreat and as the market picks up once again, they come back in full force. They are the perfect barometer for gauging the real state of the market.

As each cycle moves towards an upswing and then inevitably slows down, there are always stories of investors who got their fingers seriously burnt. The story is usually the same. A novice investor trusted a property spruiker who convinced them to invest in a certain property or area, made it easy for them, and then as the market went pear shaped their property dropped significantly in value. They were overcommitted and had to sell, and they lost some or all of their life savings. 

Although things have been quiet in the last year or two, you will have no doubt noticed the growing prevalence of property seminars, educational products, and the like being marketed through newspapers, the radio, and even telemarketing. Hotels and convention centres are awash with seminars selling the dream of investing in property and retiring rich. You can usually spot some of the more unscrupulous ones thanks to their over-the-top and unsubstantiated claims like “become a millionaire in your sleep”. But sometimes, it’s not always that easy to sort the good from the bad. 

As a property educator myself, I’m all too aware of the shonky operators out there leading investors towards purchasing poor investments and buying beyond their means. In fact, I must admit you could probably call me a property spruiker. Guilty as charged. But there is a key difference between what I and a few other legitimate operators do versus the others.

How to tell if property presenter falls into the good, bad or ugly category

You need to be aware of the different types of spruikers that are out there so you can identify them. In my experience, I have found there are three breeds of property spruiker:

• The first breed are legitimate operators, educating investors and providing completely independent and unbiased information. They genuinely want to help and see the investor succeed. The figurehead is often a long-time investor themself and a very successful one at that.
• The second breed may appear to help investors. However, they educate investors using high pressure sales techniques and provide advice in order to lead the investor towards purchasing only property for which they receive substantial commissions. This breed are usually more interested in making money and not in providing the right advice, hence the investments made with this group are often risky. Usually the figurehead has not earned their success through investing, but through sales and commissions they’ve made in the business.
• And the third and final breed are the most dangerous. These operators are often fraudulent and conniving, preying on the weak and the uneducated. They often have questionable experience in successful property investing and will do whatever is necessary to make a buck. Don’t be surprised if they disappear with your money or if you find your “investment” is a dud.

You should be aware that currently property spruikers are generally able to freely offer whatever advice they like in relation to property investment without regulation from authority. It is this lack of regulation that is the main reason why we see all sorts of self-proclaimed “millionaires” and “property experts” enter the scene looking for a quick buck as soon as the market starts to improve.  This is exactly why you need to be on alert as not everybody in this industry is suitably qualified to provide the advice and information that they do.

In my opinion, I would advise you to only ever deal with the first breed of property presenter. So what should you look out for and how do you avoid falling for the tricks of the other two breeds?

Follow the money trail

Above all else, I believe this to be the most important determinant of an independent and unbiased presenter you can trust, versus a spruiker with ulterior motives you should avoid. Everybody needs to get paid somehow, nothing comes for free. So if a spruiker is offering to help you with acquiring an investment property without it costing you a cent, that’s a serious alarm bell. You need to ask the question, how are they getting paid if you’re not paying them? More often than not, they will be paid a handsome commission from a developer for selling their property to you. In that case, are they really acting in your best interests and providing you with unbiased investment information? Stick with property firms who don’t take any commissions from developers and instead get their payment directly from you. It may appear to cost you more upfront, but it will easily pay itself off in a great investment.

The buying and selling conflict

If you are looking to buy an investment property, be wary of businesses that help you acquire the property but that also sell property. This could be directly, as in they also function as regular real estate agents, or indirectly, in that they have “relationships” with developers and the like. This presents a real conflict of interest as it is in their best interests to try and sell you the properties they promote, rather than other (perhaps better) investments on the market for which they don’t make a cut on. Only a Buyers Agent can truly represent the buyer in a property purchase.

Only pushing specific projects

I would generally be cautious about businesses that will only sell you very specific projects. Typically these projects are branded developments that are heavily marketed. You can usually spot them because they are packaged and promoted under a name that sounds rather glamorous. These projects in most cases are brand new off-the-plan apartments or house and land packages in outer suburban growth corridor areas. In some cases these types of projects may be an okay investment, but more often than not you can do much better elsewhere. Generally they are fully priced, full of fat including sales commissions and GST, in areas with below-average growth prospects. Not a wise investment in my books.

Making outrageous promises

If anyone tries to tell you investing in real estate is a guaranteed investment, they’re lying. Very few things in this world are guaranteed. Although property has generally been relatively stable and profitable for many over the last 100 years, real estate is still a risk like any other investment. If they tell you it’s easy to become a millionaire in next to no time, without of taking a reasonable level of risk, they’re also lying. You can become a millionaire through property investing but it requires time, patience and smart investing.

My final piece of advice to avoid getting ripped off is to educate yourself and become financially literate.  Go to a few seminars from independent presenters, read plenty of books, join property blogs and forums, and speak with friends and family you trust who have had success in property investing. Too many people don’t understand enough about investing in property and rely fully on the advice provided to them, often via just one source. Armed with knowledge, you’ll be able to ask the right questions and objectively evaluate the opportunities presented to you and the advice you’re given. And confirm your final decision by working with fully independent and reputable advisors such as an accountant, a valuer, or buyers advocate. Bottom line, if it sounds too good to be true it usually is.

Momentum Wealth and its affiliated entities are not Accountants or financial Planners. While all information is provided in good faith, you should seek your own independent advice in relation to all matters regarding investing, taxation and superannuation.