Investment strategy ideas

Typical Spruiker we see on share forums all the time
Register an account just before they post pretend they want to get some infor on some product and want feedback, people blasted them they try to answer it nicely with a bit more spruiking

they may even bring in some friends in to back up their claim

Smart investors picked out all their devious tricks, game over

 

....sorry, you think its "fairly certain" that a valuation is going to come in higher than the sale price?!? And on a new property being sold to you by a random investment company?

It honestly sounds like what someone that works for the company would say.

I would have thought it was the opposite - "fairly certain" its going to come in lower than contract price.

 

Hey Thomas - here's a potential purchaser for one of your properties!

 

It does not work that way within the BCC Footprint in inner Brisbane,land value on vcv rateable value is only a guide .. It just depend on what price the buyer is prepared to pay..Once you step outside the footprint of the BCC,then there is no way anyblock will value up the same ..

 

Haha yep where do I sign?
So a person who's never invested in property before gets approached about a strategy and structure, wants to find out more info/whether it's a good idea/if anyone else has used said company or structure etc, comes on here, asks a question and gets told they're a salesman for the company? Or they must work for the company hahaha amazing

 

Sorry, meant they would be easy to check. As in the bank would do an evaluation before lending you the money and you could be fairly certain if you were being ********ted to or not and could walk away if it came in under what you were told. Same for the depreciation, I assume an accountant could tell you if what is being quoted for the strategy is accurate or not.

Actually, I'm an underground miner so a lot of my friends/workmates fall into their target market. The account is new because I've never needed investment advice before.

 

No and no. Crossing other property means you wont be told what the valuation is. Accountants arent financial planners.

You dont even know how bad that sounds. You clearly need advice to avoid spruikers.

 

Except depreciation isn't an investment strategy. Most experienced investors don't even factor it into their calculations since its more of sweetener on top.

And a valuation coming in at contract price just means it isn't a complete dud. It can still be 80% dud.

Honestly you have lots of people here telling you to run, not walk, and you still seem to be ignoring a lot of that advice?

 

Heard that before.

 

I don't understand what "crossing other property" means. I've only ever bought the house I live in and I was told at that time that the bank would do a property evaluation and if it came back lower than what I'd offered then they wouldn't allow it. Is this not the same for an investment? Couldn't I order my own evaluation? That's how I thought you could check if they were full of **** about getting the property for a good price.

I realise accountants and financial planners aren't the same thing. Wouldn't your accountant calculate the depreciation of your assets at tax time though? That's what I was implying they could check/estimate beforehand.

That's why I'm here.

Do you mean it could still be a dud as in it won't make any capital gains or may fail to get tenants or something else?

As for the advice, I'm trying to question everything. Didn't think it'd be too smart to just believe everything without trying to understand it a bit. Don't particularly want to talk to other people that are interested and just say "Heaps of people on the internet said run and I believe them 'cause they sound smart." I'm also looking for ways to protect myself or anyone I know that does decide to invest. As I said, I've already got one friend that has started investing with them and I doubt he will be the last.

The depreciation (tax reduction) is the cherry as myself and most of my workmates pay $50k+ per year in tax and are lucky to get $1k back unless we have investments or something else. The properties are supposed to be slightly positively geared or within a few grand of neutral in low to medium risk markets. The depreciation is the tax incentive (hence the new or near new properties as most of us have a lot of tax to try and get back) and the capital gains over time are the investment strategy. (That was how I understood it. If this is a bad idea, why?)

Like I've said previously, I've got one friend who has already started investing with these guys and run the ideas past both his financial advisor and accountant and they didn't try to talk him out of it. I heard about it from him and another friend is now interested and to be honest, so am I a bit. But it sounds a little too good to be true, hence why I'm here trying to find out more. I'm a naturally curious person and dismissive "nah, you're an idiot, don't do it" answers aren't enough. I want to know why it won't work.

They say they have good connections with developers and can get better than public prices. Is this impossible? Why?

They say they're studying the markets, population growth, vacancy rates etc and think they have selected areas that should experience decent capital growth. Is this any different to half the conversations I've been reading in threads on this site? Everyone seems to have their predictions and like I said earlier, I pretty much consider it all educated guessing. Some are just a lot better educated than others.

Lots of people have mentioned about commisions. Of course they get a commision, so does my mortgage broker and my accountant just gets paid an hourly/job rate. Everyone gets paid in one form or another, I'm just trying to figure out if these guys are any more worthy of my commision compared to any other real estate agent that would sell me a house.

I'm not trying to ignore anyone's advice, I'm trying to play devil's advocate so that I can try to get a grasp on both sides here. My first reaction when I heard about this was scepticism as well but it piqued my curiosity and I don't think I was the only one.

Let me put it this way, I recently wanted to buy a new TV, I went down to the shops and asked the salesman for advice. Once I thought I had one picked out, I went home and googled reviews for that particular TV. I didn't spend months learning about every component and how to build a TV because I don't have time for that. I found reviews and read as many as I could to see if they fit with what the salesman had told me. That's what I was looking for in my original post, reviews.
I understand buying investment properties is a whole lot more complicated with a lot more variables but the principals of what I'm trying to do are the same. I'm trying to fact check the salesman's story and see if it is a valid strategy and if not, why? If it depends on things like the true value of the property, the city/location of the property, the use of depreciation etc. how do I fact check these things?

Sorry for the novel, just feel like I'm not being understood and I'm struggling to understand some of the info in the responses and thanks to anyone that is trying to help.

 

Ever tried buying a tv when you dont know what a tv looks like or what it does? Ask for a black shiny thing and you end up with a sandwich press.

 

No fair enough, and I understand a lot of what you're saying. If you're willing to do the work, then all the answers you need are on this forum.

Spend a few months reading here before you commit to buying anything, trust me.

You're not the first person to come here asking the exact same questions, so you should be able to find the threads that have the relevant content for you.

 

Hi @Thomas Cale. These are great questions, but they're very easy for a property spruiker to hide bad results...


Bank valuation:

They almost never come back higher than the purchase price. I've financed thousands of properties over 14 years, I've only ever seen a valuation higher than the purchase price about 3-4 times.

I seen 1-3 low valuations a year. In most cases there's something interesting about these properties, one of those things is brand new off the plan investments.

It's easy to disguise a low valuation. The financier uses your existing house as additional security by 'cross collateralising' the investment with your own home. It doesn't matter how bad the valuation on the investment property is, they've got your house as security to make up for it. Also it's unlikely that they've give you a copy of the valuation at all.


Tax benefits:

Spruikers will tell you they only promote new property because there's stamp duty savings and they gain more tax benefits. Stamp duty savings have been effectively cut in the 2017 federal budget and the tax benefits are the same as any other property. Also you should never invest for the tax benefits. Invest because it's a good investment, any tax benefits are a bonus.


Capital growth after purchase:

Spruikers tend to only compare new properties with the one you're buying. They don't compare it with sales results of existing properties (in new estates there often aren't many sales of existing properties to compare too). The price of other new stock in the market is controlled by developers. They set the price, it's not a free market. You should be comparing the value of the property you're purchasing to other independent sales in the area, not to those controlled by valuers.


Constantly tenanted:

Often people are offered a rental guarantee for 1-2 years if they lease the property through a particular agency. This agency will meet the guarantee by supplementing the actual rent with some money you paid for the sale. I've heard many times that after the rental guarantee period expires, the rent has to be reduced significantly. A rental guarantee is a warning sign because it's being paid for by the purchaser.


The reality is that most people buy a property from property spruikers and they're happy for a period because they're ignorant of the realities. It's only a few years later that they realise they've either been outright deceived or could have done better using independent advice.

Some warning signs:
* Rental guarantees - for the reasons already outlined.
* They recommend the solicitor, mortgage broker, property manager - these people should all be working for you, but when they're recommended by the person selling the property, their interests are more aligned with the sales persons. None of the advice you receive is independent, they'll hide problems such as low valuations for the spruiker.
* One of their qualifying criteria is you own a home with a reasonable amount of equity in it - this allows them to use this equity to hide bad valuation results.
* You don't pay for their services - they receive a very, very large commission from the developer. As a mortgage broker, I usually receive about $2k - $4k for most loans. I've been offered $30k or more to refer clients to these groups.

 

This is one of the many issues. You think since everyone has to get paid, it doesnt matter. It matters who is paying them. The selling agent works for the seller. If the commission comes from the developer, who are they looking out for? You buying one property, or the developer paying commission on 50?

 

Sorry I still don't buy it, I have seen this many times before on share forum, the exact same tactic
you may be genuine but I found it is hard to belive due to the facts

1. If you care about your protecting your capital and you ask for advice and most experienced investors on here tell you to run but you keep coming back with more stuff and sneak a few spruiking ideas here and there like I got a friend already invest with them
and said thing like "They say they have good connections with developers and can get better than public prices"
that a sign of spruiker
Your mumma would tell you there is no such things as a free lunch and when it comes to high finance, you get free lunch but you paid for their dinner buffet

2. Most reasonable people when they hear this much negatively of a product from
people who do nothing but provide free good advice, you would say thank you very much
and you run you don't come back and keep wanting to invest with this mob whoever they are

3. You would abandon this idea and start doing your research and education but clearly, you are not, you still want to stick to this mob with your confirmation bias

enough said

 

@Thomas Cale property spruikers have been around for decades. The sort of business you've described has been around for at least 25 years (by my personal experience). There's been hundreds, perhaps thousands of newspaper articles describing customer complaints years after the purchase. There's been repeated outcry's from the realestate and finance industries for this to be regulated. There's even been the odd property spruiker who's done some prison time (usually for whatever the authorities can pin on them, because they're not directly regulated).

I've been approach dozens of times from various companies to refer clients to them. I've yet to meet one that I'd want to buy a property through. There's numerous other ways for me to buy property that I believe would get a much better result. It's possible that these guys might be really good, but on balance of probability, you're likely to be much better off by getting a buyers agent to help you make a purchase.

As a broker, clearly I've got no problem with commissions, but in this case the advice you're receiving is incredibly conflicted and frankly tainted by numerous deceptions that can and actually do occur as part of the process.

If you do or don't proceed, nobody here has anything to gain or anything to loose. The general consensus on this forum is to share good information but if you make a bad decision it really doesn't affect anyone but you.

 

hi @Thomas Cale , you would have come to your own conclusion after reading all the above post/advice/opinions.

the big question is, let's leave the type of properties aside, what do you want to achieve by a certain of property? tax benefits, capital growth, rental yield...? it is hard to have all from one property. you might have a better/clearer idea of whether the properties you looking at are good or bad once you prioritise your objectives.

 

YES.
My first Investment Property is in the same general location as one that a similar spruiker, (salesman) recommended to me by our (then) standard, dumb mortgage broker. We took one look at the "deal' and burst out laughing. It was a tiny block of land in a floodable cow paddock underneath a high voltage power line, about four klms away from the centre of the actual town. In the end we bought another house, about eight years old, for just a smidgen higher price than the Off the Plan house and land package the guy was spruiking. Our house is half as big again, on a block of land half as big again as the other one. Ours is a ten minute walk to the best private school in the town and one kilometre from a huge Westfields with cinemas, pubs and all the other goodies. Today that OTP house and land package, and the other identical 2000 of them in the next suburb over, are worth the same as what they were back then. The one we ended up buying is now worth $100K more.

Of course it's impossible. Why would the developers sell a block of land to you for any less than they would sell it to anyone else? If you simply google land for sale in the same estate, it will usually be exactly the same. Same with the "house". Why would a builder sell one to you for any less than they can sell it to anyone else?

We are not talking about TVs that come from China by the container-load which cost less and less to build every week. We are talking about great big bulky things that dont sell as often, cost a fortune in add-ons and govt taxes, and take an eternity to manufacture using highly-paid Australian labourers