The $50,000 you didn’t know you paid to a property spruiker

COMMENT

This is a property market where outrageous commissions, which I have seen span up to $50,000, are built into the purchase price that you pay. A world where the naive are suckered into signing up for brilliantly marketed properties because “the tax benefits and automatic capital growth mean it will pay off in the long run”.

A few years ago we had a client in tears and on the verge of a mental breakdown because she had been convinced by a “property guru” to buy a negatively geared investment a few years earlier. This was bought through that same guru.

She was a 50-year-old divorcee who owned her own home and was debt-free at the time, earning $50,000 per year in an administration role.

Having been sold the classic story of how she could use negative gearing as a tax benefit, she bought. She was told that one day it would become positively geared and that the capital growth would set her up for retirement.

What they failed to tell her was that she had paid a premium for the property in the first place. They also didn’t explain that the holding costs would almost send her bankrupt. In the end, she was a victim. Her only crime was trusting the wrong people and being given the wrong advice.

In the end, she owned a negative geared investment property and $700,000 in high-interest debt.

All I could advise her to do was to sell the property and clear the debt, while I “worked on” the financier for a significant rate reduction on the residual $165,000 debt.

Her previously unencumbered home now had a $165,000 mortgage against it and no investment property to show for it.

Subsequently, she was encouraged to take legal action against the outfit that put her in the situation – yet she refused, crippled with embarrassment and wanting to put it behind her.

Her situation is by no means unique.

There are hundreds of people in the investment property sector only too willing to sell you investment properties with secret commissions of anywhere up to $50,000 built into the price.

Over the last 15 years I’ve been approached by developers and marketeers offering commissions if I would introduce their properties to my clients. I’ve shown them the door.

What’s most dangerous is when the sharks don’t appear, on the surface, to sell property. Instead they sell ‘education’. Education is crucial, however too often education programs lead you to the promoter’s selected properties and it’s the same game with a different label.

Ensure the education you think you’re getting isn’t an upselling course in disguise. If the entry level program is $2990 and there’s another course promoted during this program that’s even pricier, think twice.

Some “free” educational events, seminars or workshops could be hosted by a marketer or group who take a sizeable share of your eventual course fees. This explains the ridiculous price tags each one charges for their specialty course and the long list of so-called experts appearing as special guests.

Have your eyes peeled for what property industry experts are really selling. In the investment sector that price tag might just include a hefty secret commission.

Ask the person vying for your signature exactly what their commission is. If they refuse to answer, walk away.

2017-10-15T08:20:08+00:00