Warning for investors about dodgy property spruikers
A national campaign has been launched by consumer regulators around Australia to warn potential property investors about property spruikers who claim to be ‘wealth creators’ but are really just in it for themselves.
In WA, Acting Commissioner for Consumer Protection David Hillyard is advising consumers attending these seminars to be wary of any deals promising big returns with low risk and to get independent professional advice before becoming involved in property investments.
“There are many cases where people have signed up to deals during these property investment or ‘wealth creation’ seminars and have lost money. They have paid a lot of money for advice and coaching but not realised the returns they were promised,” Mr Hillyard said.
“While there are legitimate companies that offer credible property investment advice and opportunities, equally there are a number of rogue operators that can apply high pressure sales tactics at ‘free’ seminars to persuade people to sign up on the spot.
“Typically, participants are denied an opportunity to seek independent professional advice about realistic returns and the legal and financial risks associated with the substantial investment they are considering.
“The spruikers create the impression they’re financial experts who can make you lots of money through property investment. They claim to offer safe deals where high returns are practically guaranteed.
“So we urge people who attend these seminars not to get caught up in the hype or to make impulsive decisions they may regret later.”
National campaign ambassador and finance expert Paul Clitheroe cautions against relying on testimonies promoting ‘get-rich-quick’ schemes, where the fallout may be years away from when the person first invests.
“You wouldn’t get medical treatment from someone offering the same remedy to everyone in a room so be wary of the property spruiker who sells the same ‘investment’ scheme to everyone at a seminar,” Mr Clitheroe said.
“Basically, the spruikers are just in it for themselves and accept generous commissions once the deal is done. The investor is then left with what is probably a dud deal more likely to lose money than make it.”
Be wary of:
- high pressure sales tactics rushing you into decisions, signing contracts or paying fees (including discounts offered to seminar attendees who sign up on the day)
- property deals where the spruiker supplies mortgage broking, conveyancing, settlement or tax advice
- the suggestion the spruiker’s scheme or system is ‘government approved’ by frequent reference to the Australian Taxation Office (ATO) or Australian Securities & Investments Commission (ASIC)
- spruikers offering personal loans or credit to help you pay the enrolment fees for training courses
- property investment strategies that put your current home at risk by using the equity to borrow significant money to invest
- claims of capital growth rates that may not be independent or credible
- spruikers who side-step questions or downplay the risks and costs involved
- the promotion of a particular property development as the spruiker may be receiving a commission or have an undisclosed interest in it
- offers to buy properties interstate that you have not seen, or off-the-plan properties
“In some cases, seminar attendees might be taught how to sell or promote a rent-to-buy scheme. These schemes are fraught with danger and target people who are desperate to get into the housing market as well as people who are finding it difficult to sell their home,” Mr Hillyard said.
“Rent-to-buy schemes involve purchasers paying a deposit as well as a premium on top of their rent with the hope they will eventually buy the property, but in reality they often lose their money, as they can’t get finance to complete the sale and finally breach the strict contract terms.
“The seminars may also be a tactic for organisers to sell expensive training material or courses. If the promotional material doesn’t clearly state goods or services will be sold at a seminar, you will most likely be eligible for a ten business day cooling-off period under the Australian Consumer Law. This means you have the right to cancel any commitments made on the day without penalty for items valued at more than $100. This right may be extended to six months if you weren’t told about this cooling-off period.”
More information and videos are available at www.commerce.wa.gov.au/cp/spruikers. Enquiries can be made by calling Consumer Protection on 1300 30 40 54 or by email firstname.lastname@example.org. Consumers can also visit ASIC's MoneySmart website which has information on its investment seminars page.
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