Australia: Real Estate Scams

Beware of scams when investing in property in Queensland

Surfers Paradise in Queensland is a major centre for real estate scams

The Real Estate Scam Ruining Lives
Perhaps you’re an investor in Queensland, Australia. You’re getting constant cold phone calls and home visits from various real estate agents. You’ve been to some of their high-pressure seminars. They promise you low fees, a high rental income and strong capital growth on investment properties.

They tell you there is a lot of competition, and deals like this one are few and far between. You know that you need the money for your retirement so you are tempted, not wanting to miss out on what is being presented to you as a huge opportunity.

However, for thousands of people who have bought these investment properties, it has become a nightmare. These victims realize, too late, that the promises will not materialize. The fees are higher than first expected, the rental income is lower and there are no tenant waiting lists. If they choose to resell the property, they also come to discover that there has been no capital growth.

One such couple said they had found themselves a unit in 2010, listed at AU $328,000 at the time. It is now up for sale again at $389,000 and bringing in $500 rent a week. They used the now collapsed firm, Future First Investment Services, who insisted that they buy through their broker.

They were told the property was unviable and much more expensive. So the couple now owes $320,000 on another unit that Future First found for them. This property is bringing in $285 a week in rent and other apartments in the complex are on the market for $210,000. This problem is widespread.

How Does This Happen?
Basically, the problem comes down to loopholes in Queensland law, allowing marketers to hide the full costs. And for another thing, companies that promote investment properties do not legally need a financial services license. So it is relatively easy for dishonest companies to use misinformation and high-pressure sales techniques to scam people looking to invest for their future.

How to Avoid Being Scammed

  • Do extensive research before you commit to anything.
  • Avoid “seminars” where you will be pressured to commit on the spot: do not underestimate how effective these sales tactics can be.
  • Get an independent property valuation and make sure to have mortgage brokers and lawyers with you when you sign the documents.

If you are considering investing in Queensland real estate, please take the time to read this enlightening article in The Australian first – it may save you from a nightmare experience.

Philip

5 Comments

  1. Getting advice from a lawyer beforehand is a good idea before you make any kind of investment IMO.

  2. These laws need amended so that hard working people stop losing their money to these scams. The government should step in and do something immediately.

  3. I’ve heard of things like this happening here in the US… is this like the popular Time Share scams we see here? If so, then I myself was caught in one – thankfully early on, when I was only $200 into the whole. I’ve been to several seminars, and they seem really legitimate, but I guess only some are. I have friends that own timeshares and love them, and other who have thrown tons of money into the pit for their time shares. I’m still not ready to write off the idea of vacation ownership completely, but it’s definitely not the sure thing that they make it out to be in the presentation!

  4. Wow, people still believe these scammers? I’m surprised, so many hard working citizens (to quote Ed above) were already scammed into losing their money, why do people still make such bad investments?

    • Unfortunately, the sales people who do this are very, very good at manipulating people. I have worked in sales myself and can tell you that there is a huge amount of psychology involved in selling.

      I worked in business to business sales, so my clients were very knowledgeable and understood whether a product or service would be valuable to their business. Salespeople who sell to consumers, on the other hand, often find they are dealing with people who are not very knowledgeable, sometimes even naive and often easy to manipulate. And unfortunately some of those with few ethics will happily exploit them in order to get a commission.

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