Five SMSF property spruiker tricks you should not fall for

Five SMSF property spruiker tricks you should not fall for
Five SMSF property spruiker tricks you should not fall for

Since John Howard lifted the ban on superannuation funds borrowing money to invest in 2007, self-managed super funds (SMSF) have invested around $80 billion in property.

A March quarter survey by SMSF administrator Multiport found that 18.6% of super fund assets were property holdings up from 17.4% a year ago.

At the same time ASIC has been raising alarm bells about spruikers targeting this sector of the market with a new taskforce established to look into the behaviour of unscrupulous operators and may also consider expanding its regulatory powers to include property investment.

Just this week a property investment adviser who allegedly recommended to various NSW investors that they set up SMSFs to invest in the development of a number of house and land packages in Queensland was charged with eight counts of fraudulent misappropriation.

In May, ASIC cancelled the credit licence of Money Choice Pty Ltd (Money Choice) and banned its director, Matthew George, after an investigation found failures to comply with credit laws, responsible lending shortfalls and instances of unlicensed self-managed superannuation fund (SMSF) advice.

In April, it was revealed that four Melbourne businesses running seminars on investing in real estate through SMSFs are being investigated by ASIC over the potentially misleading nature of flyers, advertisements and online ads promoting these seminars.

This week, ABC’s The Business program provided a special report on “less scrupulous schemes encourage people to set up funds and then borrow heavily to buy property” calling it a “ticking time bomb”.

These are five tips we have gleaned from this broadcast:

1. Don’t let appearances fool you

Consumer advocate Neil Jenman told the ABC that SMSF property investment spruikers will come across as across as “smart, clever, sophisticated, intelligent, trustworthy people. They don't come across like crooks”. He advices that no matter who you are dealing with you should "do your homework and read the fine print".

2. Be wary of cold calls that promise you can save tax and pay off your home quicker

Noel Whittaker from QUT Business School told the ABC he was aware of one Gold Coast company “making 22,000 cold calls a week” which begins with: "How would you like to save tax and pay your home off quicker? Well to see if you qualify, one of our consultants will come to your house." The next thing that happens, according to Whittaker, is a “six-hour brainwashing interview which ends up with you buying a property from them”.

3. Do your own research on property values, don’t trust rental guarantees and promises of discount prices.

Spruikers are likely to use a high pressure sales approach and seek to sell you properties at inflated values, but tell you they can sell them for you at a discount. They will also often offer guaranteed rent on a property they are selling. The higher prices are used to pay the rental guarantees and the high commissions to those promoting these property investments.

4. Always get independent advice before you sign

A spruiker will most likely connect you with their own network of property valuers, mortgage brokers, financial planners and conveyancers who may be in on the game. The four Melbourne sandbelt Melbourne businesses under investigation by ASIC were a law firm, mortgage broker, a real estate agency and a firm of chartered accountants all allegedly acting together in promoting a property investment SMSF scheme. You should always seek out the opinion of an independent valuer you trust and choose your own mortgage broker, lawyer and financial planner.

5. Don’t trust everything you read on Google. Seek personal experiences

Apart from being excellent at presenting themselves as trustworthy, spruikers are also aware that people will do their own research online. To combat this, spruikers have become very good search engine optimisation (SEO) and “flooding the web with positive material to keep the truth from coming out”. Claire Mackay from financial planning firm Quantum Financial Services, which assisted a “financially literate company executive” sucked in by plausible sounding SMSF spruikers, said she had trawl through around 15 or 16 pages of Google searches to “find out more than just guru property experts revealing the secrets”. Speaking to people who attended a seminar about their experiences is a much better way to gauge the real intent of marketeers.

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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