As regular as mould in the wet season, property spruikers are coming out again in a rising market. ASIC is again warning anyone to be aware of get-rich-quick schemes involving property. You always know they are about to sprout up again when commercial TV networks are full of renovation shows. Industry experts are aware that the reserve and sell prices on shows like The Block are seriously unrealistic and give a false impression to viewers on the kind of money that can be made with renovations.
Just a quick run through some of the most visible ones:
1. Seminars or Investment Clubs
These often are spruiked with promotions like “I was a single mum on a pension and now I own a property portfolio worth a gazillion dollars! Let me show you how (exclamation mark, exclamation mark)”. Usually the only people making money at these events are the people taking the door charge and signing you up for more courses.
2. Cheap Properties in USA
This one is starting to fade out now that USA property is on the turn. I am not disputing that some investors have made money by investing offshore wisely. There has been a window where some quality property has been sold cheaply and the currency exchange was favourable. What often happens is that since you are not there you are sold a rundown crack house in a crime ridden neighbourhood which can never be rented or sold in any market.
3. The Nigerian Scam
This is an extension of the identity fraud scam and has been tracked back to Nigeria. After gaining access to your ID and property info on a rented investment property, the overseas perpetrators are able to impersonate you to have your property listed and sold and the money repatriated to a foreign bank account. Two properties in Perth were recently scammed by fake owners residing in South Africa.
4. Land-banking Options
A new one that is interesting is the land-banking scheme. You are asked to join a land banking investment club that puts an option to buy cheap rural land near a regional town. One is currently being investigated and prosecuted in the Victorian Federal Court operating around Bendigo in Central Victoria. Investors are told the land has the potential to be rezoned as a residential subdivision in the future. La de da!
5. Rental Guarantees
As a rule of thumb, stay away from any development that offers a rental guarantee on off-the-plan units. The developer basically budgets in the rental subsidy for one year and then the rental return, and the value, tanks after the year is up.
Property is still one of safest and reliable ways to make money. However there is fast track to immediate wealth. It is best to be a farmer rather than a hunter. A farmer takes the long view and cultivates good property over the long term. A hunter looks for the quick kill and often gets bitten.