Real of Fake?
Remember my blog about how to make the YPC team laugh out loud? (The subject was a property investment scam doing the rounds.)
Very often clients ask us our opinion of these type of deals and we always try to help them understand why the deals are too good to be true.
Part of me takes some heart in this because our clients obviously have a great deal of respect and trust for the YPC team to ask their opinion in the first place, but another part of me is frustrated because you considered the investment in the first place. And, yet another part of me is angry that scams like this can still exist and operate out there with relative impunity.
Take it from me get rich quick is for fools with more money than sense. Out of the millions of people who try to get rich quick each year a very very tiny few ever make it. People have lost their homes over it, so be warned. If you read my investment education blog regularly or have read my book The 3 + 1 Plan, you’ll already understand that the safest way is get rich slow.
However, if you have come across something that you consider to be the best thing since sliced bread, then you really really really need do your due diligence.
Happily, due diligence is relatively easy these days by using various credible websites to find information on the target property investment opportunity. Some of the websites may even be Government websites and if you have access to RP Data it’s a powerful tool for research. So get on the web and really dig deep and see what you can find out. Forums are another good source, although the information may just be someone-else’s opinion and unreliable.
Next, ask tough questions of the people trying to sell you the investment in the first place. Are they using high pressure sales tactics? If they are, stop taking their calls. Most of all think very carefully about the ways it could go wrong and how hard/easy it would be to put it right. Ask yourself:
1. Where are they based and where are the investment opportunities?
If your money is going to an offshore company operating an offshore investment (like farmland, car parks, development land, hotels etc), then ask yourself what redress do you have if you suddenly needed your money back or you discover the investment isn’t quite what you thought it was? For example if the investment operator is in Australia and is a financial product ASIC regulates the market and would be your first port of call. However, property is not a “regulated product” under ASIC, so this means you are not protected. Your best bet is to go to the Real Estate Institute for the state in which the operator is based.
2. Do you own the underlying asset or hold credible share certificates (ie issued in Australia by an authorised person/company)?
The underlying asset is the basis for the opportunity. If you’re offered an investment overseas but the property investment company goes bust, do you actually own the asset or was it owned by a company in which you had the shares? If it’s the latter, you’re at the bottom of the feeder when it comes to getting your money back.
3. What if the authorities can’t help you? Where else can you turn to?
Probably a solicitor, but taking someone to court to get your money back is expensive. You try and do it overseas and add several noughts to the solicitors invoice. It may be cost prohibitive.
4. Who is selling you the investment? Do they have a history and solid track record in selling the investment type or just new as in ‘here today, gone tomorrow’?
Have they done anything previously that has been a great success and investors that are happy? I suspect not, in most cases.
The best advice I can give is make sure you get better-than-best-advice! Stay safe, work with people you know and trust and do your own due diligence. Taking a punt with an overseas investment is particularly fraught with danger. Yes, every investment has a level of risk and that is acceptable.
And just to reiterate particularly watch out for the ones overseas where there is no redress here in Australia. The ASIC are ruthless when policing the investment industry at home, but are helpless if the professionals (solicitors, financial advisers etc) are based overseas.
If you want more information about anything in this article, give one of my team a call on +44 (0)207 923 6100
Live with passion,
Brett Alegre Wood