Investor Warning

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Investors should seek an independent second opinion when investing their super savings in property, according to the Real Estate Buyer’s Agents Association of Australia (REBAA).
The industry body’s president Jacque Parker urges investors to question advisors offering inflated property values and guaranteed rents.
“The real estate industry has always attracted its fair share of ‘shonky’ selling agents and it’s disappointing to hear advisors accepting kickbacks from developers under the guise of “financial advice” and taking advantage of innocent investors,” says Parker.
REBAA’s warning comes amid reported claims of advisors receiving higher than standard commission payments for recommending off the plan residential apartments as self-managed super fund investments.
Earlier this year, property commentator <a href="/expert-insights/investing/29276-standby-exclusive-tips-from-the-experts-on-how-to-spot-a-dodgy-operator" target="_blank">Neil Jenman told Property Observer</a> that "property spruikers are getting commissions ranging up to $50,000 per property".
Parker advocates engaging an accredited buyer’s agent for a second opinion on property investments. Buyer’s agents do not sell real estate but specialise in finding, evaluating and negotiating property purchases on the behalf of buyers.
 “The old saying ‘if it sounds too good to be true, then it probably is’ certainly applies here,” said Parker.
“If you are an investor who is considering investing your superannuation in property, then we would highly recommend you get an independent second opinion from a buyer’s agent.
“Independent buyer’s agents do not sell real estate or accept any kickbacks from other sources for doing so.
“If they do and they don’t disclose this to the buyer then they are contravening Section 47 of the Agents Act.”
Parker claims that using a buyer’s agent can save investors thousands of dollars.
 
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Don’t be lured in by “one stop shop” SMSF advisors: REBAA

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AMP is axing new mortgages to property investors with five or more properties.
It continues the lender crackdown on borrowers with multiple dwellings.
The Australian Financial Review reports AMP is also tightening scrutiny of all loan applications and banning new loans to investors whose property related income, which is typically rent, is more than half of their total declared income.
AMP is also decreasing the maximum amount of verified gross rental income it will accept for loan-servicing purposes from 80 to 70 per cent for properties in higher risk zones, such as inner city high-rise apartments.
The number of households with an investment property grew at the height of the property boom, especially in 2014-15-16, according to analysis by the Australian Taxation Office, although the numbers with a big portfolio does remain comparatively limited. 
Investors with big portfolios increased by about four per cent to about 45,000 with four properties and 20,000 with six properties in the most recent data.
It kicked off in the 2014-15 financial year the number of investors with five or more properties grew by 7.5 per cent – almost double the rate of growth over the previous nine years.
Of the 11 per cent of the adult population with investment properties in Australia, more than half of those are now owners of two or more properties, according to data included the RBA’s Financial Stability Review.
One in 10 investors own three or more properties, the central bank said, based on analysis of Australian Taxation Office data.
Professionals such as teachers, lawyers and accountants are the biggest group of investors by professional grouping – these groups account for 22 per cent of property investors in 2014-15.
Managers and professionals together – the two highest-paid groups – account for 37 per cent of all investors in property and have close to the highest level of negative gearing.
The most highly negatively geared group of workers is machinery drivers and operators – they account for just 3 per cent of property investors but 74 per cent of them are negatively geared.
The data showed a marked increase in the age of property investors, with the number of over-60s in the market almost doubling in the 10 years since 2005 to now account for about 22 per cent of all investors.
Property portfolios valued at $2 million in popular Sydney and Melbourne suburbs are generating weekly returns of less than $752 after deduction of expenses, according to recent analysis by chartered accountant and adviser William Buck.
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j.ballantyne1990-6AQqhLzZaK

AMP stops new mortgages for investors with sizeable property portfolio

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Checking testimonials and reviews, particularly online, are one way we all do a little bit of our due diligence when looking for any type of holiday accommodation or even restaurant to go to.
Property investors also largely use them for experts and professionals to help them with their buying, renovating, building and even accounting.
In fact, they're such a powerful way to be convinced into using a particular company or individual that it's rare to see a website without them.
But, just as it's easy to write someone a testimonial - which they may, or may not, use - it's just as easy for a less-than-reputable character to be overtly selective with their testimonials or just to fabricate them completely.
WHAT IS A TESTIMONIAL
Testimonials are comments from customers and clients of a service or product that explain their service and how they found dealing with a company of person. They are heavily used as marketing tools, and for promotion, in every industry - from the Sham Wow to the back of a novel. Testimonials can be incredibly useful for finding out what other people think about a service.
You might see them in newspapers, in emails, on websites or forums (particularly the business' own website), on review websites and in brochures.
MUST KNOW
Before we get into when to be alerted by a potentially fake testimonial, for companies in Australia it's worth noting that making, relying or using false or misleading testimonials is unlawful, according to Consumer Affairs Victoria (CAV).
That means, while they shouldn't be falsified, if they are then you do have a right to notify Consumer Affairs about it.
CAV notes that businesses that regularly rely on testimonials include alternative health care businesses, restaurants, weight loss service provides and, of course, estate agents.
<blockquote>
Businesses that regularly rely on testimonials include alternative health care businesses, restaurants, weight loss service provides and, of course, estate agents.
</blockquote>
If you're a real estate company using testimonials, basically make sure they're coming from real people, you haven't paid for a review, that you note down if there has been any sort of commercial relationship with that person, that you do not delete negative reviews and that you keep records of them all.
Remember, while less common, some do use fake testimonials to purposely say bad things about a competitor as well. These are also misleading, and you'll want to keep an eye out for them.
WHAT TO BE WARY OF
Duplicate reviews in different names, or appearing in different places multiple times.
Reviews that seem to overtly suggest you use the service, often providing discounts or codes. They may even be slagging off a competitor within the same review.
Review websites that are in some way associated to the company.
Email addresses with three or more numbers at the end - suggesting this is fake and may have been created by an automated program.
If it's an Australian company that deals with primarily Australian residents, then be wary if all the reviews have Americanised spelling. This should be a surefire warning sign that there's something fishy going on.
Those that sound like advertisements (there's a specific tone to be aware of). Be alerted by anything over the top, overly endorsement heavy, and non-specific. If they have industry-specific terms or phrasing that an average person is unlikely to use - also be aware.
Websites where all the reviews are positive or where large numbers of reviews sit at either end of the spectrum. The majority of real people give reviews within the two to four star bracket, rather than the one and five stars.
<blockquote>
The majority of real people give reviews within the two to four star bracket, rather than the one and five stars.
</blockquote>
Gut feeling is a powerful thing. Would this be something you could see yourself writing if you had the same good/bad experience? If not, why not?
Do they overtly use words and phrasing that a typical person would not? For instance, they may refer to a iPad Mini as an iPad or an iPad Mini, but it's unlikely they'd refer to its complete specs in a review e.g. iPad Mini 16GB with retina display and Wifi. Similarly, phrasing might be a little... off, particularly if cliched.
Not everyone is a wordsmith, and it's likely some people will use typical phraseology to review an item, but something like the following sentence reeks of falsity: "Great buying experience, couldn't be happier - now on my way to millions!". Unconvinced? So are we.
While not everyone will allow you to check their identity, usually there's at least one person with their full name (in which case, is it a "common" name that cannot be verified?).
If photos are with the testimonial - are they stock photos? Have you seen them used elsewhere? Search the photo through Google images' search function or through a reverse image search. Just because a photo has been included, it doesn't mean it's real.
Have you checked reviews across a number of sites? If you haven't it's time to get Googling a little more. Check out forums, where unhappy clients may be able to tackle false reviews more easily by providing their own experiences.
Look for links. Links to a person's blog or own website can be a powerful thing, suggesting they're a real individual. However, a 'tracking' link or a link that redirects you suggests that the review may be paid for.
If you're wanting to verify any further, then Property Observer suggests calling the company in question and asking for contact details for the person who provided the review - or for your contact detail to be passed on (such as an email).
Video testimonials can be even more convincing for some, however how do you know when the video was taken? Was the reviewer halfway through a seminar, or about to head in? Again, it's worth asking to contact the individual themselves.
Think you've seen a false review on a property product online? Email: <a href="mailto:jduke@propertyobserver.com.au" target="_blank">jduke@propertyobserver.com.au</a>
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jduke-EHk3XBmHkn

How to tell if a testimonial is fake: Spruiker alert

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New residential buildings will have 12 months to make the required changes to smoke alarms.
The new Building Code of Australia (2014) will require all new smoke alarms to be interconnected when there is more than one alarm in a residential dwelling. When interconnected, if one fire alarm is triggered, the others in a home should also be activated.
Western Australia’s Building Commissioner Peter Gow has confirmed that the 12 month transition period will see the requirements coming into effect on 30 April 2015.
“Some building and electrical industry stakeholders were concerned about their ability to comply with the new requirements, so we have applied the one-year transition period that was built into our new Building Act to give the industry time to adjust their operations,” said Gow.
If dwellings are approved for construction before 1 May 2015, they will not be required to include interconnected smoke alarms. However, old dwellings will still need to have smoke alarms or heat detection alarms no older than 10 years old installed before they can be sold, transferred, hired or rented. 
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Investor alert: Changes to smoke alarm requirements for new residential buildings

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Personal insurance isn’t something that property investors should ignore, warns EPS Property Search director Patrick Bright.
Australia is one of the most underinsured developed countries in the world, Bright said, and many investors are failing to adequately protect themselves.
“Before you sign a contract to purchase a property you should have the appropriate insurances in place, at the very least income protection,” said Bright.
“You not only want to protect your 10% deposit in case something unforeseen happens between exchange and settlement but you want to know that you can complete settlement.”
He said that one of the quickest ways to lose your home is through unpredictable occurrences that stop your ability to earn. Many property investors consider burglary, tenant damage or natural disaster, but then fail to consider the possibility of dying or getting ill.
Pointing to an Australian and New Zealand Institute of Insurance and Finance study on the Victorian Black Saturday bushfires, he noted that for 171 people who died – less than $1 million was paid out in life insurance.
“You need to insure the person who is paying for the asset rather than just insuring the asset itself,” he explains.
“Ask yourself how your family will manage if one of the breadwinners becomes sick or dies? Do you have the necessary income protection and life insurances in place to protect your assets and allow your family to continue their quality of life rather than being forced to sell the family home?”
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Investor warning: Don’t ignore your personal insurance

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A warning has been issued by the Magistrates’ Court of Victoria about scam emails advising about court and tribunal appearances and proceedings.
The email may advise you to report to court on a specific day/time and to bring documents and witnesses.
The email instructs the recipient to open and read an attached ‘court notice’. They’re warning that this contains a virus and that you should not open the attachment and that you should delete the email.
“If you are not involved in a proceeding, a court or tribunal will not communicate with you by email. Unsolicited emails or requests for personal information are not sent by courts or tribunals,” VCAT is advising.
 
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Been called to Tribunal recently? It may be a scam

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The Victorian, New South Wales and West Australian state governments have issued letters to property spruikers in their states outlining their obligations under consumer law.
Victoria’s consumer affairs minister, Heidi Victoria, spoke to <a href="https://www.propertyobserver.com.au/https://www.abc.net.au/news/2014-07-08/state-governments-warn-spruikers-to-stick-to-the/5581698?section=business" target="_blank">the ABC</a> about the high pressure, persuasive techniques used by property spruikers at seminars and events.
“The sort of things that we’re concerned about is, for example, a high pressure sales environment – so when people come along just for information, but then feel obliged to either spend money on an education program, or that type of thing,” said Victoria.
“We want to make sure they’re not feeling pressured into signing anything on the night, that they are given plenty of time. But also to understand that those operating in the space must give a 10 day cooling off period.”
In February, the ABC reported that West Australia, New South Wales and Victoria’s governments were monitoring 15 property spruikers. However, Victoria said though some property spruikers had received letters outlining their legal obligations, Consumer Affairs Victoria was not currently investigating any particular property spruikers.
“This is just more a general ‘get to know you’ sort of letter, and say, ‘these are your rights and obligations’,” Victoria said.
“We’re very much about educating people who are operating in any business. The type of letter that has gone out to them just outlines their responsibilities, and also their obligations, and of course if they don’t abide by their obligations, and if they’re not working correctly under Australian consumer law, then we can take it much further.”
Of people investing in property through a self-managed super fund, Victoria said consumers must know their rights.
“A lot of people have to understand that when they’re doing this sort of investment, that they need legal and financial advice,” she said.
“It’s not something that can be taken lightly. As I said, it really is something that many people put their life savings into, and the last thing they want is for that to go belly up. So they do need to know their rights, their obligations as consumers and make sure they are investing in something that’s going to be safe, and something that has that long term projection.”
To see the letter sent by West Australia’s Commissioner for Consumer Protection, see next page
<hr class="system-pagebreak">
West Australia’s notice to the state’s property spruikers warns them of penalties associated with misleading consumers, which include fines of up to $1.1 million.
In a letter sent to property spruikers by West Australia’s Commissioner for Consumer Protection Anne Driscoll, she states:
<img src="/images/2014/07/10/cut-out-july-10-one.jpg" alt="">
In particular:
<img src="/images/2014/07/10/cut-out-july-10-two.jpg" alt="">
 
She adds:
<img src="/images/2014/07/10/cut-out-july-10-three.jpg" alt="">
Driscoll notes that misleading claims “can result in penalties of up to $1.1 million for a corporation or $220,000 for an individual”.
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Property spruikers receive warning letters from states

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Real estate would be a delight for investors, were it not for the real estate “industry”.
There are times when the industry appears to exist only to mislead consumers into taking action not in their best interests.
Consumers’ best interests are subverted by industry vested interests.
There are myriad examples. Here’s one. There’s a company that makes it money marketing property in specific locations. But the principal markets himself as a mentor. Someone who guides investors on how to buy the best properties in the best locations.
A recent promo advised consumers on the best places to buy for high yields. By the purest of coincidences, the “top three picks” in Australia to buy for positive cash-flow were all places where the company is marketing product.
They included the company’s specialty area, the Pilbara region of Western Australia. South Hedland and Karratha were recommended as the best places in the nation to buy.
Here’s the pitch from the “mentor”:
“I’m a big believer in investing for cash flow and I’m always keeping an eye on which locations around the country are performing well in this area. Knowing how to locate these is vital if you want to find positive cash flow properties in Australia.
“I have some great strategies for how to locate high yield investment properties, but for now I want to share with you my top three property picks.
“There are plenty of towns where investors are achieving higher yields than those that I suggest. However, I have greater confidence in the long term outlook for the ones I’ve featured in my blog.”
He then suggests areas in which his company is a major marketer of off the plan apartments and other properties.
Here’s the reality for Port Hedland/South Hedland and Karratha. Both markets are in decline but remain outrageously overpriced.
The median house price for <a href="https://www.urban.com.au/property-observer" target="_blank">Port Hedland</a> was $1.2 million, but has dropped 17% in 12 months and is now down to $970,000 - still way too high for investors to consider.
Rents have declined a lot so, despite the price drop, yields are typically 8%. In the boom times they were commonly 12%. Vacancies have been around 6% since late in 2012 and this market is still falling, with discounting of about 11%, according to Australian Property Monitors.
<blockquote>
Here’s the reality for Port Hedland/South Hedland and Karratha. Both markets are in decline but remain outrageously overpriced.
</blockquote>
Nearby South Hedland is also in rapid decline, with the median house price down 6% and the median unit price down 14% in the past year. The marketing company says yields from 9% to 12% are typical, but APM says the median yields is 7.8% for houses and 7.5% for units. It takes six months to sell on average, with discounting around 12%.
It’s even uglier in <a href="https://www.urban.com.au/property-observer" target="_blank">Karratha</a>, with price decline steeper, yields lower, discounting higher and time on market longer.
In the Karratha suburb of <a href="https://www.urban.com.au/property-observer" target="_blank">Nickol</a>, the median house price has dropped 17% in 12 months. That includes 5% in the most recent quarter, so the market is still falling. The last time there was any price growth was 2010, with the market sagging an average 12% per year for the past three years.
Discounting is around 13% and it takes five months to sell the average Nickol property. In nearby <a href="https://www.urban.com.au/property-observer" target="_blank">Pegs Creek</a>, it takes seven months to sell.
Typical yields are claimed by the marketing company to be 8-10%, but APM indicates 6-7%, amid 6% vacancies.
Keep in mind that the mentor says these are not just good places to buy, but the best places to buy in Australia. Mentors like this you don’t need.
To provide a further feel for how this organisation pitches to consumers, here’s what is claimed to be a testimonial from a “seminar attendee” …
“I spent an evening at (name of presenter)’s seminar and all I have to say is: this guy delivers. It was a supersonic combo of strategic investment insights and wealth-building how-to’s from people who walk the talk. Incredible speakers, killer content and amazing connections, all brought together in one jam-packed evening. They clearly have a talent for creating a valuable, education, high-energy experience.”
The chances of a genuine customer writing such a tribute are zero. A “supersonic combo”? Who talks like that?
You will note they claimed it came from a “seminar attendee”, which was probably a team member or possibly the seminar presenter himself. Technically, it’s not untrue.
You can contact Terry via <a href="https://mailto:ryder@hotspotting.com.au" target="_blank">email</a> or on <a href="https://www.twitter.com/hotspotting" target="_blank">Twitter</a>.
Image courtesy of Wikimedia Commons.
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terryryder-YECXbqmri2

Port Hedland and Karratha "the best places to buy"? Don't get roped into that one

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Rent to buy schemes, also known as vendor financing, have received some bad press over the past year – and it seems that their run isn’t up.
Consumer Affairs Victoria has promoted tweets, warning that property buyers should be wary of “high risk” property investments, including rent to buy.
<img 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" alt="">
Warning <a href="https://www.consumer.vic.gov.au/housing-and-accommodation/buying-and-selling-property/buying-property/high-risk-property-investments" target="_blank">against property spruikers in the same link</a>, rent to buy schemes are targeted. It notes that this variation of vendor sales targets lower income earners, or “prospective property buyers unable to obtain mainstream finance”.
It warns that buyers have limited legal rights if the arrangement goes wrong.
Under a rent-to-buy scheme, the buyer enters into a rental agreement with the vendor where they are charged high rent (well above market rate). At the end of the rental period they may buy the property but ownership of the property does not pass to the buyer until they exercise the ‘option to purchase’ after the rental period has expired.
Those who clicked on their promoted tweets would have seen the following:
The risks for buyers
<ul>
<li>Rent-to-buy contracts are high-risk schemes for buyers because the title of the property is not transferred to them until they have purchased the property outright. 
</li>
<li>You will likely be paying significantly above market rate rent and will not have any equity in the property until the full purchase price is paid. 
</li>
<li>The rental period may last several years and, if your circumstances change, you may be unable to complete the payments. Therefore, if you pay almost the full purchase price but do not complete the payments, you won’t get your money back and will not have any claim over the property. 
</li>
<li>Even if you complete the rental payments, you may still not obtain a home loan and lose not only the property, but also all of money you have spent. 
</li>
<li>Be aware that if you use your first home buyers grant to buy a property, you will lose the right to apply it to any future property transactions. 
</li>
<li>Some rent-to-buy contracts may indicate that you will lose all payments made and have no claim over the property, if you fail to make even a single payment on time. 
</li>
<li>In addition to rent payments and an option fee (for the option of purchasing), some contracts generally require you to pay for repairs and maintenance, council rates, insurance and other outgoings. 
</li>
<li>Potential buyers should be aware that these costs may be substantial, particularly with an older or run down property. 
</li>
<li>If the vendor has a mortgage over the property and fails to keep up their own repayments, their lender may have the right to repossess the property.</li>
</ul>
Source: Consumer Affairs Victoria
Vendors must be aware that they must:
<ul>
<li>Abide by the rent-to-buy contract and be unable to sell the property to the another buyer (perhaps offering a higher price) while the contract is in force, even if you need to liquidate your assets due to a change in circumstances. 
</li>
<li>Be effectively locked into a long-term settlement period where the purchase price is fixed and you will lose any right to future capital growth if the property’s value increases over that time. 
</li>
<li>Remain legally responsible for the property until the buyer makes the final payment and the property title is transferred.</li>
</ul>
Source: Consumer Affairs Victoria
They also warn that if you are using the rent to cover the mortgage then you will be left vulnerable if the buyer fails to pay, and the renters may choose not to buy the property mid-way through the rent to buy process.
As an example of what can happen, on one instance in 2011, <a href="/expert-insights/investing/13166-tenants-sell-landlords-pool-while-they-are-overseas" target="_blank">tenants sold a vendor’s pool in a rent to buy swindle</a>.
Western Australia’s Consumer Protection has been particularly bullish against rent to buy schemes. For one company, the Supreme Court ruled that one operator was illegally functioning as the owners were not licensed estate agents and also misled those who signed up – this was <a href="/news/16877-wa-rent-to-buy-scheme-ruled-deceptive-and-illegal-with-other-schemes-facing-investigation" target="_blank">in the case of No Loan Home Pty Ltd in June 2012</a>.
In another publicised situation, a WA rent to buy property scheme saw <a href="/news/18901-monday-news-injunction-sought-against-wa-rent-to-buy-property-scheme-that-took-signed-david-beckham-jersey-in-lieu-of-deposit" target="_blank">vendors taking a signed David Beckham jersey and a Franklin Mint Edition Monopoly Board in lieu of a deposit</a>.
Property Observer followed what caused a young brother-and-sister duo to be led <a href="/expert-insights/investing/29299-from-seminar-to-success-story-to-getting-fined-in-the-supreme-court-of-western-australia-how-it-happened" target="_blank">from a rent to buy seminar to being fined in the Supreme Court of Western Australia for their property dealings</a>.
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