How to spot fraud in property


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Who among us is not tempted by the thought of making a quick buck?

We work hard for our money, but many Australians feel stuck on the treadmill of money coming in and money going straight out again.

They just can’t seem to get ahead.   property mistake bad size invest trap house

We are told that the best things in life are free and while I sort of agree with this, in order to be fully free to enjoy our lives we need enough financial freedom to focus on what matters to us.

Residential property is a great way to make money but the gains are built over the long term.

If you buy the right property in the right area and hold it for at least 10 years, then you are likely to see healthy returns.

But there’s always those who look for a quick but – you know speculators wanting to flip a property in a short time for a tidy profit.

These are the kinds of investors that I fear will be susceptible to the get-rick-quick schemes that proliferate not just in residential property but all parts of the investment pond.

If you are an impatient investor you could end up in hot water so it is important to tread carefully when assessing the merits of a new venture.

Marketing materials

If a company’s marketing looks a little amateurish then you should be extremely cautious.

If there are inducements, excessive punctuation, bright fonts and claims that seem a little far fetched on the company’s marketing brochures, then this could be a sign that they are desperate to get people on board so they can make money (rather than you).  

How does their website look?

Is this a company that looks like it has been around for a while and has a professional site that isn’t too gimmicky?

These are things to look for.

The marketing materials should imbue you with a sense of confidence about the company, and that should come from their professionalism, clean presentation and overall  ‘look’ rather than any outlandish promises of what they can do for you.

Also look out for testimonials that seem manufactured or a little over the top.

Making contact

Transparent companies do not mind you asking questions about their business before you invest your money with them.

They know they have nothing to hide and so they are keen to display how up-front they are with their fee structure, how they make a profit and so on, to distinguishing themselves from the charlatans.

It’s a bad sign, however, if you can’t easily reach a representative of the company.

An email address that is not checked for days is a worrying portent as it means the same kind of sloppiness will be applied to their overall business.

Even if you are able to chat with someone over the phone, be a little wary if they are not so keen to catch up with you in person, citing a lack of time or inconvenience.

You really don’t want to go into business with anyone who cannot give you their undivided attention for a decent amount of time, as it usually indicates they have something to hide.

Beware the seminar

I am sure most of you have received this invitation at least once seminar in the last months. happy property investors

Come to our ‘free’ seminar (why would I pay anyway?) and hear about how they can deliver you to financial freedom in six easy steps.

There is usually engaging, upbeat music and charming presenters who will tell you that they hold the key to unlocking the secrets of successful property investment.

They may induce you to sign up for yet another seminar or to commit quickly to purchasing a property at a special rate.

My advice would be to give these schemes a wide berth.

Often these seminars in residential property are fronts for developers wishing to offload stock to investors.

They will promise huge rental returns and great properties, but you have to ask yourself the question: if the properties are so great why are they not brought to market where more people can fight over them and potentially up the sale price?

Why are they being offered exclusively to you, for a limited time only?

Because savvy investors would not touch mediocre stock with a barge pole and I suggest if you want to make the most of your hard-earned cash or retirement savings you follow suit.

Of course, not all investment seminars are run by shonky salesmen, at Metropole we conduct them once a year ourselves to help educate property investors, but keep a close eye out for people trying to flash their wealth in front of you and give you the hard sell.

Off the plan

Most regular readers of this blog would be well aware that I am not a fan of off-the-plan properties.

This is not to suggest that developers are crooks, just that this type of property is not in the best interests of investors wanting to invest in properties with good capital growth prospects over the long term. Off-the-plan

The problem with a lot of off the plan stock is that you are investing in an unknown and all of the risk is yours and yours alone.

You put a deposit down on a property at a value that has been determined by the developers, even though that property may not be ready for a few years.

As we all know, a lot can happen in the residential property market in that time.

The contracts lock you in, you have very little room to get out of the contract, and yet often the developer can back out at any time.

You may be left high and dry, too, if you bought in a rapidly gentrifying area and the prices have since gone up.

Did you know there is often nothing to stop some developers from withdrawing from the sale to secure a higher price from someone else?

That may mean years wasted and you will be back to square one again.

A word of warning, too, about rental guarantees.

If a developer has to offer this kind of inducement to sell their new development then something is clearly wrong with it.

Overseas markets

Australia is one of the more expensive residential property markets and as many people are priced out of capital cities, they are beginning to look overseas.

Very few will be successful with an overseas foreign investment property house market stats price figures data

Unless you have grown up in the city or country, speak the language and are familiar with local laws then I would not recommend this path.

It is hard enough to get your due diligence right in a familiar culture, let alone in a foreign country with a foreign residential property market.

You may be tempted to buy that run-down home in Sicily, which is worth a car space in Sydney, but if something seems too good to be true, it generally is.

There is no path to financial freedom other than hard work, patience, diligence and a bit of smarts.

And it certainly isn’t going to come from someone in an expensive suit at a seminar offering false hope.


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Brett Warren is Director of Metropole Properties Brisbane and uses his 13 plus years property investment experience to advise clients how to grow, protect and pass on their build their wealth through property. Visit: Metropole Brisbane

'How to spot fraud in property' have 2 comments

    Avatar for Brett Warren

    June 20, 2019 Loressa Clisby

    Hi Brett,

    Thanks for the article. I’m about to sell my house in the USA and the thought of purchasing in Australia is quite unaffordable, with the astronomical prices here. I’ve already looked into all the above mentioned in your article, and am at a loss what to do, since I want to live in Sydney. Perhaps another option is to buy a fixer or wait for a knock down house and rebuild new?


      June 20, 2019 Michael Yardney

      Yes property values are expensive in Sydney. It may be best to rent where you want to live and invest where you can afford to buy


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