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Ben Kingsley

25/07/2016
Blog post by Ben Kingsley

What to know about property promoters’ investment returns claims

Hi Ben Kingsley here and in this How to Session I want to focus in on being careful about some property promoters and the way in which they exaggerate or potentially mislead you around the investment returns they’ve got for previous clients. Now, I’m talking about some of these claims where they are quoting in excess of 30% returns in a 12-month period. Now, obviously they sound interesting and they are trying to attract you in with such a big and wonderful number but the reality is, they may be dealing with a lot of different marketplaces and a lot of different stock and not everyone is enjoying those types of returns. Great businesses normally don’t spruik their ways around these mega returns and they have independent assessment and analysis of the results they have been able to achieve as opposed to sort of saying, “For Mr and Mrs Smith, we’ve bought this property over here and 1⋅8 months later, it’s 30% more than what we paid for it”. But what about the Johanneses and the Wongs? And everyone else that they’ve bought for in different location, how well have they performed? Because ultimately, it is still a fundamental case of supply and demand and owner occupier appeal that we are looking for to get the best returns possible.

So if you are interested in learning more about these types of promoters, what do you need to do when you sit down with them? Well, there is a couple of things that you need to do.

Firstly, you need to ask them straightforward and direct questions about their claims. How are they validating their claims? Can they show the last 50 purchases that they made or four years ago, what were they buying and where were they buying and what were those investment returns for those clients? Because it’s no good in just looking at the last 12 months, I mean ideally, in our business, start to assess returns after around 5 years so it has gone through the cycle of that market to be able to move through. I mean, anyone who has bought in the Sydney market 18 months ago has certainly enjoyed a real uplift.

Was it anything to do with their research or was it just the rising tide lifting all ships? That’s the question you want to ask.

In addition to that, don’t be afraid to do some independent research so get on to some of the property forums that are out there such as Property Chat or Property Investor.Com and have a look through those forums to see if there have been any conversations around that particular company. Now you may not find what you’re looking for because some of these companies get their legal people to actually get negative comments removed from those types of forums as well. So it’s really important that you continue to keep investigating and doing your due diligence because the reality is, often if it quoted to be too good to be true, it is more than likely is too good to be true. And you will be able to unpack that. A great professional company should be able to validate their research in detail, they should be able to make sure they are providing a solution based on your needs and your personal goal, not on what they can get off the shelves or not from the stock list that they are offering you. They should be tailoring that solution from your cash flows and your financial circumstances.

And you’d know if you’ve got a good one. The way which you know that they are not deflecting the question, they are answering them as honest and transparent as they possibly can. They are usually also very transparent about how they are being paid and we have other videos on property spruikers and some of their tricks and tactics. But because we operate in an unregulated industry which means there is no laws in stopping these promoters from making these claims, these exaggerated claims, I think they are misleading and deceptive and that’s why I want to put this How To video together. So, remember it all comes down to doing your due diligence about the professional you want to work with and running through that checklist and making sure those investigations and you should come out the other side with the right type of company and the right type of advisor who can help you with your dreams. Thanks for watching.

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