Letter from the editor: Scam watching

Property cycles go from hot to cold and back again, and at the moment interest in property is at a high. This means that we're seeing some trying to take advantage of market conditions.

We live in a culture of victim blaming, and property is not kept separate from this. In the property industry, opinions and advice are everywhere. Some of this advice is dodgy, and some of these dodgy operators are harder to pinpoint than others.

Regularly, when someone gets scammed, or takes bad advice, we're told they must have been "stupid" or "lazy". But it's worth remembering that it's not just those who don't undertake due diligence, or who "should've known better" that can get tripped up. It's also worth being aware that not everyone was brought up in a household where property investing was a 'thing' or where they were even exposed to a property being bought or sold once - I know many people who have bunkered down from when their children were born until their children moved out.

It's also worth remembering that people can be strangely trusting. That unless the dodgy agent, or broker, or whoever, shows up in a melodramatic black cape, with slicked-back hair and a Dr. Evil cat, it sometimes never occurs to them that this person could be doing anything other than what they claim to be doing on the box. We have to remember that while some do get ripped off unnecessarily (yes, they should have known better), regularly investors are time poor individuals like the rest of the country – with families, jobs, hobbies and commitments.

Search the words 'fraud', 'scam', 'illegal' and other buzz words via our search engine and you'll no doubt come up with countless examples on Property Observer alone, and search Google and you’ll find even more.

Picking the low hanging fruit

The best way to protect yourself is to change your personal mantra. Many people are trusting of those they come into contact to, however it's perhaps best to consider 'Guilty until proven innocent' when undertaking your research into individuals. With this in mind, consider everything to be a potential scam when you first see it. Those with the more obvious traits will quickly reveal themselves.

The first way to find out whether or not to deal with someone suggesting their advice to you is to head onto Money Smart. The government has, handily, provided a list of "companies you should not deal with" - which is a fairly easy way to rule out the more notorious.

These are companies who have been soliciting investment business and do not hold an Australian Financial Services (AFS) or Australian credit licences from ASIC. Consider subscribing to ASIC alerts. However, as property is not considered a 'financial product' it's a little harder to quickly rule out a number of different operators.

You then want to find out if anyone else has done the hard work, and outed them as a scammer, spruiker or otherwise. Be aware of vested interests, particularly from those posting anonymously in comments or on forums (who could be competitors), but keep your ears open. The best scams are regularly masquerading as decent opportunities, and the most dangerous are those that purport to be on your side, bringing your guard down.

Never assume that a good looking website, the fact they have aligned themselves with a spokesperson of decent repute, or a well put together appearance, makes them more trustworthy than anyone else.

Property Observer's personal rules. Be wary if:

- The advertisements tell you that you need little to no money, and little to no borrowing capacity.

- It's said to be extremely low risk or 100% risk free. No investment is risk free.

- You are told you can get rich quickly, or with little effort. Usually the opposite is true with property.

- You are offered a 'one stop shop' and encouraged not to seek any external advice (particularly around legal advice).

- You are told that "anyone" can do it. This is simply not true.

- They call themselves "Australia's best" or similar without providing any source. Who said this? Was there an award? What did they need to do to attain this title?

While none of these rules guarantees that anything untoward is occurring, you should immediately be on your guard.

Then you need to be asking questions. However, it's not just about asking the right questions, but also testing the responses. The testing part is one many investors regularly forget to do. A common one, for instance: Do they really own $10 million worth of property, or is it $9 million worth of loans and $1 million of equity they're sitting on? How can you be sure?

And, if you need to fall back on it, there's always the simple "too good to be true" test.

One thing we'll be doing is continually covering when there has been bad advice, and how to spot it before you make the wrong mistake. We'll also look into just what to do if you have found yourself victim to untoward activity.