How to avoid property sharks

Every property cycle smooth-talking property sharks start circling. Here's how to ensure you don't get eaten alive and lose everything.

cam mclellan opencorp

Blogger: Cam McLellan, director, OpenCorp

I’ve now seen many property cycles come and go and my business partners have seen many more again. There is one common thing that emerges every time a market heats and this time seems to be no different.


If you choose wisely, you can expect your property value to increase at around 8% a year, so property investment is a pretty safe bet.


Smart investors get rich slowly.

Yet during a rising bull market you’ll find seminar rooms full of people lapping up the advice of so-called experts. But once the party’s over and the market cools, these guys do a Houdini faster than you can say economic downturn.

Don’t get me wrong. I believe in investing in education. So long as a weekend course is not the extent of your learning. After all, you wouldn’t expect to become a pro-golfer after just one weekend out on the course, would you? If you really want to educate yourself, don’t just go to one investment seminar. Go to them all!

Back a few years ago when a certain slick operator doing the rounds I considered myself a pretty savvy investor. At the time I played in a band and one night our drummer told me he’d just paid $8k and was in the process of handing over another $15k (huge money back then) for a property course. He’d just signed on to buy three apartments off the plan with the aim of selling before settlement. He told me he was going to be a multi-millionaire.

I was intrigued and went along to one of this person’s seminars to see if I was missing something. I was shocked by what I heard. The advice he gave was based on the theory that prices would continue to escalate, as if the bull market would never end!

Around 3,500 Australians had their lives devastated, losing collectively around $50 million dollars as a result. They were convinced that they could become rich by buying multiple apartments for the small outlay of $400, the cost of a deposit bond. The aim being to flip them for a higher price before settlement.

They weren’t the first to be conned and they certainly won’t be the last.

There are plenty of these guys out there who will take advantage of the uninitiated. Often they’re getting paid massive commissions to promote poor investment options, or they own the development and simply want to move stock. These people are sharks who don’t care about ruining lives. Always do your homework and question the advice you get from experts and advisors.

Beware; investing is like jumping in the ocean. It’s great fun and sometimes feels very powerful. But look out, someone always wants to take a piece out of you and if you let them, they’ll eat you whole. The bigger you get or the more you show off, the more sharks you attract.

Sharks come in all shapes and sizes. Usually they are fast talking, pin-striped, single breasted and wear a tie. But here are a few things to keep in mind.

First rule of engagement: ask everyone you meet what they charge up front and get in writing what they promise to deliver. Asking the cost up front and politely demanding things in writing before doing business is not rude. In business, it’s the rule. Remember as I always say, property investing is a business. If someone doesn’t give you a straight answer or won’t put something down in writing, you’ve started to smell that fishy shark smell. If someone lies on the little things, they will definitely lie to you on the big things that matter.

If you hear a lie, you’ve smelled a shark. Swim away fast.

Most people who think of sharks in the property world think of agents. Agents aren’t sharks, not scary sharks anyway. You know exactly what an agent wants to do. They don’t hide from the fact that they want to sell you a house. You know they will try to work every angle they can. They will take any information you give them and use this as leverage to sell you a property. That’s cool, we’re in the property buying game. We can live with that, but it is important during your investment journey, to understand how agents are paid and some of the basics about the way they operate.

Sharks to look out for:

Skimmer sharks: a type of shark that doesn’t go for the big bite, they live off lots of little bites. These are the sharks to keep an eye out for. Skimmer sharks are people who charge more than market rates for their services or deliver a service below what is agreed. Skimmer sharks can live off a client for a long time taking lots of little bites while smiling their sharky smile the whole time. This is why it’s important to have clear agreements in writing when dealing with people, and then hold them to their agreement. This way, skimmer sharks are exposed quickly before they start to nibble. If you have a basic agreement in writing with the people that you deal with, if they then try to take a little bite from you, you’re able to politely smack them over the nose with your written agreement; this keeps every one honest. Don’t allow people to feed off you just because you may like their personality.

Great Whites: the most feared and dangerous shark of all. The Great White is an all-powerful shark; they come from nowhere and dazzle you with their fast talk and enormous presence. These are the sharks that aim to eat people whole. In a slow market they look for get-rich-quick schemes to ‘educate you’ on things like how to buy an old granny’s backyard and retire from your big score. Watch out for the feeding frenzy in a bull market. They smell blood and come out thick and fast when the market hype starts in the papers. You’ll see amazing deals like apartments off the plan with projected end values based on fast moving markets. This has emptied lots of people’s pockets and left them holding seriously undervalued investments.

I’m not opposed to you paying for education, there’s more to learn out there than just what I tell you. If you do pay for education, be very sure of the skills that you will obtain and how you can practically utilise these skills. Ensure that you are getting value for your money.

Smart investors know that a true wealth strategy is not built around market hype or get-rich-quick schemes.

People who try to get rich quick aren’t investors, they’re speculators and speculators lose money more often than they make it because they don’t have a systematic low-risk investment strategy.

Remember people and process. In life you are the only person that will make things happen. Invest your time into education and learn the process of a safe investment strategy. It’s then up to you to make things work.

Be wary of sharks. I guarantee you will definitely meet plenty along your journey.

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