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Buying investment properties 

In recent years, concerns have been raised over the conduct of certain property promoters, particularly investment advisers or ‘spruikers’. Potential investors need to understand the potential risks involved with buying property through promoters.

What is a property promoter?

A property promoter is a real estate marketer that solicits people to invest in property. As part of their business they may also provide (or arrange for a third party to provide) the finance for the purchase of a property. Many of these products are promoted as investment options for Self-Managed Superannuation Funds (SMSF).

A property spruiker typically sells a property investment system (eg. time-share, rent-to-buy) or is involved in marketing a specific property development. Their activities generally include:

  • marketing free short seminars at which they offer investment courses and the sale of resource materials such as books, DVDs and brochures
  • offering information about a property investment system that helps you minimise your tax
  • providing market analysis.

What to look out for

If you are considering buying a rental property through some kind of promoter, conduct your own research and always obtain independent financial and legal advice. Be wary of:

  • high pressure 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 mortgage broking, conveyancing or tax advice are supplied by the spruiker
  • providing an inference that their system is ‘government approved’ by frequent mention of 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
  • evidence of capital growth rate that may not be independent or credible
  • spruikers who don’t allow you to ask questions or ignore or downplay the risks and costs involved
  • spruikers who suggest specific investment opportunities such as a particular property development. They may be receiving a commission for promoting the development or have an undisclosed interest in it
  • spruikers pushing you to buy properties interstate that you have not seen, or off the plan properties that do not yet exist.

Journalist, Annabel Hennesey went to eight seminars for her investigative report. Watch this short video to here what she found:

Property spruikers' seminars investigated (video)
Video - Property Spruikers' Seminars Investigated
(Internet Explorer users please right click on the video and select ‘Open link’ to watch.) 

The property promotion and property investment advice industry is not currently regulated by either NSW Fair Trading or ASIC. Some protection exists under the Australian Consumer Law (ACL), which prohibits misleading or deceptive conduct, false or misleading representations and unconscionable conduct.

However, you do not want to have to rely on legal action to recover a loss you may have suffered, particularly if you have bought the investment property through your SMSF.

The best protection is to always conduct your own research, and gain independent financial and legal advice from licensed professionals with their own professional indemnity insurance.

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