How to spot a property shark

They glide gracefully and silently, leaving a bloody trail of utter devastation on poor unsuspecting victims. Yet the property shark can be quite easy to identify – and avoid – when you know what to look out for.

Would you entrust your money, your peace of mind, your future, your family’s future – into someone without qualifications? Someone who doesn’t adhere to a regulatory framework? Someone with no experience?

Tragically it happens every day.

Companies that prey on innocent, unsuspecting, trusting Aussies who are keen to get in the property market.

Why are there so many property sharks in Australia?

The ‘Property Investment Advice’ industry is not regulated.

So practically anybody can give you ‘advice’ on how to invest hundreds of thousands – even millions – into an investment property.

Crazy as it sounds, it’s true.

There is no accountability for poor property investment advice in Australia. This has led to an industry that breeds unscrupulous operators who sell their properties under the guise of property investment advice – the property shark.

How to spot a property shark

Watch the video or keep reading:

Shark characteristic: Powerful pull

Property sharks have an incredible ability to target and latch onto their prey.

They normally hold seminars and fill them through mass advertising campaigns. This is very expensive – so you know they’ll want to recoup those costs and maximise profits.

Shark characteristic: Glides gracefully

Property shark presenters are usually smooth talkers. They hit all the psychological touch-points while delivering a generic property investing presentation. You know the one:
‘Properties double in value every 7-10 years’
‘You can’t go wrong with bricks and mortar’

And so on…

If only it was as simple and straightforward as they will have you believe:

Fact: Not all properties double in value in that time-frame.

Fact: You most certainly can go wrong with bricks and mortar if done incorrectly.

Shark characteristic: Meat eaters

Property sharks devastate the lives of their prey so quickly, there’s no struggle.

At the end of the seminar, they will unveil their latest development: a high-rise apartment building 3 years off plan.

Excitement bubbles up inside you, your dreams are about to be fulfilled, your future is secure – all because of the glitzy marketing material and that cool looking rooftop bar in the brochure.

You can just imagine hanging out there with your friends having a great time – so your tenants will too. You will never be short of a tenant paying top dollar rent…

or will you?

What the sharks will – and won’t – tell you

Will tell you: Buy now at today’s price for a capital gain when the project is completed in 3 years.

Won’t tell you: 20,000 similar new apartments are coming onto the market within a few kilometre radius at the same time. This will potentially dilute values significantly.

Won’t tell you: Half the apartments in the project will be sold to foreign investors which could have inherent issues.

Won’t tell you: A lot of lenders (banks) don’t have an appetite for high-rise apartments in areas of oversupply resulting in difficulty to finance when it’s complete.

Will tell you: This project has great facilities: lifts, gymnasium, rooftop entertaining area.

Won’t tell you: There will be a body corporate bill of $8,000 per annum that will greatly affect your cash-flow budgeting.

Won’t tell you: When the project is completed you will have 300 identical apartments coming onto the market at the same time – so to get tenants you’ll have to compete on price.

Understanding property sharks

What they’ll sell

If a property shark is spending all of this money to get a sale, they need a lot of people to buy. This means they need to have lots of properties to sell.

They don’t necessarily care about how good of an investment it is, they just need a lot of them.

That is why they will generally be promoting high density apartments or house and land options where there is no shortage/scarcity of land (because they can get the best terms….for themselves).

Are you getting true property investment advice – or being sold to?

Is the person/company giving you ‘property investment advice’ also ‘selling’ you a property?

One is selling to you – working for the vendor.

One is helping you buy – working for you (for example a Buyer’s Agent).

What’s the difference and why does it matter?

Once a person/company has an exclusive listing of a property to sell, they are legally and morally obligated to achieve the best outcome for the vendor.

Property sharks have no obligation (and in a lot of cases – no consideration) about a good investment outcome for you, the investor.

3 Questions to avoid bad property investment advice

If you are interviewing who you should take advice from in this unregulated industry:

  1. Find out what their qualifications and experience are
  2. Ask them if they have Professional Indemnity insurance to give property investment advice (this is rare in the industry)
  3. Find out if they have access to whole of market properties with no bias (as opposed to a limited stock-list that they have the exclusive listing).

It also helps to have a basic knowledge of the fundamentals of property investing. This will help you ask the right questions, and have a better understanding of the answers given.

Summary

  • The ‘Property Investment Advice’ industry is not regulated
  • Lack of accountability has bred property sharks
  • Spot the shark:
    • mass ad campaigns
    • huge seminars
    • smooth talkers with generic lines
    • high rise developments
    • glitzy marketing
    • no mention of similar planned high rises in area

Are they helping you – or selling to you?

There is no ‘one size fits all’ when it comes to property investing. Every investor has a unique situation with different goals, risk appetite and therefore requirements. A true Property Investment Advisor will take all of this into consideration when providing advice and developing a strategy.

Have you come across any property sharks? Do you recognise any of the traits mentioned in this article? Do leave a comment, we’d love to hear from you.

Yours in property,
Nick

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