It’s never too late to stop being scammed

As a property investment advisor you will inevitably be faced with the question at some stage of your career… “Will I chose PRIDE or will I chose PROFIT?” because in the property investment industry there are some very lucrative commissions that are on offer when a property transaction happens – particularly brand new property.

At first glance, the inner Good Samaritan in all of us will say it’s a simple choice really; we’ll always put the client’s needs first and therefore pride over profit will win every time.  But sadly, like a bee to honey, the temptation for self-interest proves to be too great for too many people to resist.  As a result, the property investment industry is full of stories of people being scammed and ripped off by so called “advisors” (more appropriately referred to as salespeople) who, when faced with the same question themselves, overwhelmingly decide to put themselves first and in doing so they have made the choice for profit over pride.

Last week, another so called “property investment advisor” was exposed on evening television as allegedly taking secret commissions and double dipping his fees from both the client and a builder that he had referred his “clients” to. After being in this industry for 13+ years I’m not surprised by this news but disappointed as it again puts a negative spotlight on property investment advisors as we are all tarred with the same brush, irrespective of whether we put our clients’ needs first or not.

So why do the scams keep happening?

Simply – very low barrier to entry!  Basically a “property investment advisor” can put on a sharp suit, hire a venue and put on a “seminar” and they are in business.  The very lucrative commissions that are on offer – up to $100,000 per transaction in some extreme cases – means that it generates a lot of interest.  No qualifications required either!   Let’s face it – your solicitor is qualified, your accountant is qualified, your financial planner is qualified… even your hairdresser undertakes minimum training but property investment advisors need zero qualifications or experience to be in the industry.  The potential for human greed coupled with low entry barriers is a very dangerous cocktail for unsuspecting consumers.

But it never too late to stop being scammed!

There are a few things that you can look for to help you find a suitable property investment advisor you can trust.  It does require you to ask a few leading questions and if you feel uncomfortable with the answers or seem to be getting a lot of platitude response then don’t feel like you need to proceed.  The following will help you minimise the risk of being scammed:

• Qualification – for the record, I don’t think this is the panacea that will simply solve the problem for consumers wanting quality advice.  Personal experience in property investment by the advisor is crucial and is never going to be superseded by reading some text books and passing an exam.  However, I think that qualification is a very useful starting point as this acts as a way to filter out the people who are looking to offer biased advice that is self-serving to them.  In my view, the Qualified Property Investment Advisor (QPIA) accreditation from the Property Investment Professionals of Australia is the one that you should be looking for.
• Experience – the property investment advisor should be walking the talk.  They don’t need to tell you every intimate detail of their portfolio but they should be prepared to answer reasonable questions about their own portfolio, locations and philosophy to see if they are practising what they preach.  And beware of the bold claims of an advisor boasting of MILLIONS in property!  My personal experience is that the ones that ACTUALLY do have millions in property are usually quite humble about it and don’t tend to try and impress others by shouting from the roof tops about it!
• Holistic Advice – looks for someone who takes into account your entire financial picture, including household money cashflow and mortgage obligations, not just someone who is looking to make a transaction and move on to the next one.  Life is all about career, raising a family, going on a holiday and having fun with your friends so the advice you receive needs to take into account real life over a number of years – not just can you afford the property over the next 12 months.
• Process not an event – look for someone who follows a proven process which includes modelling cashflow, as property investment is not simply a transaction.
• Stock list – there is no one size fits all approach to property investing, so weed the self-serving operators out by asking the question “which property do you think is best for me?”  If they pull out a stock list with a brochure then alarm bells should go off.  They should be getting to know you first – what is your appetite for risk, what is your experience level, when do you want to retire, how much do you need to retire, are you planning on having a family?,  as these types of questions need to assessed before a recommendation is made on what property to buy.  Here’s a tip – I think the best investments are established properties with a proven track record so very rarely do I think a brand new property makes for a great investment… but you won’t hear that very often as most “sales people” will tell you the exact opposite!  Hmmm… I wonder why 😉
• Commission – make sure you are aware of EVERY commission the advisor will receive from recommending a property to you.  Anything that appears to be free is usually the highest level of commissions available to the “advisor”.  Be aware of the potential for secret commissions paid to the advisor by third party referrals.
• Intuition – if it doesn’t feel right for whatever reason… cool off on the idea!  You can always learn more about the industry and make a purchase at a later date.  Beware of the “buy now to avoid missing out” statements.  I see hundreds of great opportunities to buy great property in cities all over the country each and every week so they are not as scarce as the “salesman” will tell you!

Sadly, until the industry is fully regulated, we will see more people being ripped off with property.  But to make sure that you avoid this happening to you, we only have to look to our grandfathers sage and timeless advice that “there aint no such thing as a free lunch as someone always pays!”  In my time I have been seduced personally by ways to try and beat the odds but my experience over the journey has reminded me (rather frustratingly at times) that there are no get rich quick schemes but rather get rich slow processes.

Remember it’s never too late to stop being scammed.