Some famous last words all property investors need to know | Watch out for property pumping and dumping schemes

This podcast is about more success in your life, whether it’s success in property investment, money, or any other area of your life. 

We can learn from other people’s success, but we can also learn from their failures, and today we’re going to learn about some famous last words. Ahmad Imam and I are going to chat about what people were thinking about when they made those blunders, and you’ll learn about what not to do so that you can be more successful. 

I’m also going to chat with property researcher John Lindeman and talk about some property “pumping and dumping” schemes you should watch out for.  

Some famous last words all property investors need to know 

“My financial planner called, and he said he has a special opportunity.” – The main reason they have a special opportunity is that they stand to make a commission on it. 

“I thought I was getting guaranteed high returns.” – Project marketers don’t need to be licensed, so there’s no regulation or restriction on what these marketers can promise, and not much you can do if they don’t come through. 

“I want to get in now before I miss more of the upside.” – You shouldn’t allow emotion to drive you, because that creates booms, downturns, and busts. 

“We’ve come up with a new way to mitigate risks.” – The biggest risk lies with the investor, and you can only mitigate that with time, knowledge, and a good team. 

“Well, it looked like easy money” – There’s no real easy money. If it feels easy now, it’s probably going to be harder in the end. 

“There’s very little downside risk.” – owning the sort of properties that don’t fluctuate much in value is the best way to minimize risk. 

“Analysts are predicting high growth for years to come.” – The problem with this is that most property forecasts are wrong. 

“How can you argue with a booming area that’s been growing for 10 years?” – all markets move in cycles. An area that’s been booming for 10 years is an area that’s 10 years closer to the end of its boom. 

“There’s too much uncertainty in the world to be investing right now.” – If you wait for everything to be perfect, you’ll be waiting forever, and in the meantime, you’ll miss out on opportunities. 

“I’m going to wait on the sidelines until there’s more clarity.” – This is a good way to miss the best opportunities. 

“My brother-in-law has made a killing in this suburb. It’s time I jump in.” – Taking risks that you don’t understand based on the advice of well-meaning but poor advice can go very wrong. Be careful who you listen to. 

“It’s different this time.” -- Risk will never be eliminated, growth will never be limitless, and markets are never fully efficient. When it comes to big, basic principles of investing, it’s never different this time. 

Watch out for property pumping and dumping schemes  

Faced with the prospect of little price growth on the horizon, property investors are starting to see innovative get rich quick schemes being promoted which offer huge returns.

It has always been true that if the property market can’t generate a return for investors from market driven growth, then investors can make some growth themselves. 

We have traditionally done this by improving the value of our investments through cosmetic or structural renovation or even developments.

But some new investment alternatives have recently emerged, bringing us glitzy promises of high returns from property investment without the need to outlay any significant cash up front. 

The risk seems low, the opportunity to participate is high and many of us are sucked in, usually at free so called “investment” seminars.

One clever land banking scheme offers you an easy way to get into the property market with one low upfront cost and the promise of eventual riches. The promoter sells you an option to buy land which is slated for future development, showing you the concept plan and glossy “artist’s impressions” of the finished project. All it takes is one affordable fee and no repayments. Then years later, when the land is subdivided, you can exercise your option and sell at a huge profit.

You can even participate in the property market without any upfront cost at all, by searching for and finding property owners who are willing to enter into an options agreement with your mentor. Your mentor signs and pays for the agreement, which gives them the option of buying the property at an agreed price and future time from the current owner. Then by agreement with your mentor, you will be handed a percentage of the profit.

There are also adverse possession schemes using what is known as “squatters rights” where you search for and find long vacant or abandoned properties for your mentor who then improves and rents them out, taking title to the property when the legal waiting period has expired. By agreement with your mentor, you will then split the profit from the sale of the property.

These sorts of schemes pump you full of confidence and then dump you when they fail. For example, if the land banking property is never developed, or the option for a property you have found is never exercised by your mentor, you receive nothing. Similarly, if the owner of a property which is in the process of adverse possession suddenly turns up before your mentor can legally claim title, you end up with nothing.

You can avoid getting pumped and then dumped by sticking to tested and proven property investment strategies which offer worthwhile rewards and incur risks which are manageable.

Links and Resources:

Join Michael and his team at the 2019 Property Renovations and Development Workshop – click here for details and reserve your place

Michael Yardney

Metropole Property Strategists

Ahmad Imam - Metropole Properties Sydney

John Lindeman -  Lindeman Reports 

Read the full show notes plus more here:  [Podcast] Some famous last words all property investors need to know | Watch out for property pumping and dumping schemes

Some of our favourite quotes from the show: 

“Make calculated decisions, have a system to make your investment boring, have a strategy to make your investment boring, so the rest of your life’s exciting.” – Michael Yardney 

“Rather than look for what’s working now or what will work in the short term, you know our strategy’s always been to look at what’s always worked because that way you’re less likely to get churned and burned.” – Michael Yardney 

“The ability to wait to buy something after you’ve saved for the item, rather than impulsively purchasing something as soon as you realize you want it, now that is what I call delayed gratification.” – Michael Yardney 

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