Seven Tactics of a Property Spruiker
As a property investment Advisor I’m often asked by people:
“How do you actually avoid property Spruikers?”
“What is it that you’re actually looking out for?”
And I think it’s important to revisit what the definition of a property spruiker is. There are three groups of people in my mind that you can take your advice from when you’re buying an investment property. First one is a sales person – Someone who’s has a property to sell, and they don’t pretend to be anything other than matching a willing buyer with a willing seller, and that’s ok. Then over here, you have a genuine advisor who’s selling their service, their advice and their information; and they don’t actually have a product to sell you other than the information that they’re sharing that’s tailored specifically to you. Then you have this grey area in-between where you have a sales person who’s masquerading as an advisor, but pretending that they’re acting in your best interest, and ultimately they are just a sales person with a product to sell and they get a commission for doing that.
So once we know that, we can start to understand who we’re looking out for. And the biggest tactic or the most common tactic that I see from a Spruiker is the High-Pressure Sales Tactics, where they want you to rush the decision, they want you to sign contracts today, and they want to give you a discount if you make a decision today from their mentoring packages for example. So they are very highly refined sales people, and they know the psychology behind it and they know all the right buttons to press for you. My advice is very simple.
Don’t buy from someone on the same day, because that’s talking about your future, we’re talking about a high-value transaction that ultimately if you get it right, will be unbelievably rewarding, but if you get it wrong will just take years and years to recover from.
So don’t make a decision on the same day that you hear the information. Feel free to go home and digest it and ask a few more questions, I think that’s really, really important. It’s my number one tip, take a deep breath, walk away and think about it. Don’t be seduced by the scarcity tactics they employ to get you to sign today.
The other one is The One Stop Shop where they have mortgages in house; they have tax advice, they have conveyancing and settlement. You can effectively get the advice, walk through and get a transaction done all on the same day. Everything is made smooth and easy for you to transact, and again that’s another sign to look out for. Now, that one in isolation is not an issue because some very reputable companies can provide multiple services to help you out in the right interest, or in the best interests of you. But first of all, I’d be saying, well that’s on my radar. I want to make some more enquiries about someone. I want to check their credibility, their authority, their track record. If they do have a one stop shop and they want you to get it done as quick as possible, for me that’s another tactic that they employ, and you should be very, very aware of it.
The other one is suggesting that their investment is Government Approved. Lots of references to the Australian Taxation Office and lots of references to the Australian Securities & Investments Commission. Bear in mind that those guys don’t give rubber stamps on any investments. They are the rule keepers, they are the umpires, they are the ones that make sure that the people giving advice play by the rules but they’re not there to actually say this is a good one. Well if you’re seeing that, it’s a huge sign that you’re dealing with a spruiker.
The other thing is, a lot of these spruikers often offer these Mentoring Packages that cost several thousand dollars. And what this is, is for them to give you mentoring on how you can make a decision yourself, which can in itself is fine if they actually give great advice. But they make it really simple by getting personal loans or finance in place, usually high interest so that you can actually get a mentor package again today with several discounts to make sure that you buy today. So again if someone is offering you advice or offering you a very simple Teflon coated solution for you to be able to take up their mentoring package today, I’d suggest that you should have your radar up because that may be a sign that you’re dealing with a spruiker.
The other thing to keep in mind is Capital Growth claims. If a property doubles every 10 years; it’s growing 7.2%compound growth each and every year. And a property doubling every 10 years is actually a really good result. So if anyone is making comments and claims of anything over that 7%, you really need to substantiate it. And if they’re saying that it’s going to happen in a short period of time, I would run for the hills because if you’re getting 7% growth and 4% yield, over a 10% combined , that is actually an amazing result. But if someone is saying 20% or 15% compound forever, that is a really bold claim. And have a think, if someone is recommending this property and they’re just subdivided a whole heap of land, and previously it was a farm, the capital growth rate is going to look significantly good now compared to what it was when it was a farm. So that kind of makes sense that you get this really high capital growth rate. But as an investor, you want to see sustained growth. You want on average 7-10% growth on average each and every year. Not just a spike in one year and then a flat line for the rest. So be aware of capital growth rate claims that don’t seem independent or don’t appear credible at all.
Another thing to keep in mind, if they side-step the hard questions or they downplay the risks. To me that’s another sign because I think residential real estate is a wonderful investment if you buy the right property, you finance it well and you hold it for a long term, it’s very, very great. But there are risks associated with it. There are finance risks, there are wrong property risks, there’s wrong suburb risks, there’s a heap of risks that I feel can be effectively mitigated. Ultimately there are, so if someone’s saying it’s a no risk investment, again have your radar up for something that may be wary in terms of your dealings with a property spruiker.
And my last one is around if someone has a product to sell, are they really offering advice or are they a sales person trying to sell a product? Because in my view if you’re getting property investing advice, you should get that very thing. You should get advice. It should be a written plan that suggests this is what we should do, we come to an agreement that this is a suitable plan for you, and then once we’ve signed off on it, we then go out into the market and look for a property that has not been pre-determined to suits your particular circumstances. So if you’re dealing with someone who says, I’m offering you advice and oh, by the way, I’ve got a product that I can actually fulfil you with that TODAY. My suggestion is perhaps that is not the best type of advice you should be looking for and you may be dealing with a spruiker.
So that’s the seven things to look out for when you’re faced with a very, very slick presentation of a sales person who suggests that you should buy investment properties. But as I suggested to you before, residential property financed well with the right selected asset is a wonderful, long term investment strategy. But if you fall prey to some of these scrupulous people who have their agenda at the forefront of their mind rather than your agenda at the forefront of their mind, it means you could set yourself back many, many years.