Beware of joining investment clubs or groups

Beware of joining investment groups or clubs, many of which are full of marketeers. These groups attract potential buyers through ‘wealth creation seminars’ or ‘investment seminars’ that promise to show you how to make your fortune through real estate. They often have stands in shopping centres along with a slick online presence.

These wealth clubs and gurus rarely recommend local investments, usually promoting interstate properties in the next great boom region. This is commonly referred to as two-tier marketing: one price for locals and one price for out-of-area investors. Lawyers are recommended, valuations provided and a guaranteed rent is locked in. Your first or next great property investment awaits.

Many investors don’t realise these advisers often have hidden agendas. Most are not traditional real estate agents, and are often paid an absurd marketing fee by the property developer. Fees upwards of $30,000 are common, with the price of the property loaded to compensate. They suck out the hard-earned equity from unsuspecting home owners, who rarely realise what has happened until they try to sell. Many investors have been hit by negative equity after years of ownership, only then recognising they overpaid at the point of purchase.

Always visit an area where you are considering investing. Flights are affordable and worth the expense. Arrange to get a local valuation of the property price and the rental return, along with independent legal advice (not the marketing company’s recommended lawyer), before making any long-distance purchasing decisions.

Property investment, like all worthwhile investments, takes research, strategy and planning.