Do Not Bet the House on a Dud Investment
Victorians are warned to be careful about dud investments in the US property market, after claims the strong Aussie dollar is being used as a ploy to attract consumers to investment schemes that fail to deliver on promised high rental returns.
An investor contacted Consumer Affairs Victoria after attending a seminar where he signed up for a $7,000 membership and a low-cost trip to the US. He subsequently discovered he had to pay further administration fees to join the US tour. He also signed and paid a deposit for a property without seeing it first.
Afterwards, he discovered it needed significant repairs before it could be rented. He decided not to continue with the purchase but found himself paying more than $17,000 in cancellation and advocacy fees. The man appointed a US lawyer but was only able to recover some of the fees incurred.
The Australian Securities and Investments Commission (ASIC) provides good advice on investing in property overseas, via its Money Smart website:
- Ask yourself why does this overseas property need someone in Australia to invest?
- Good tenants and good property managers are hard to find, especially when you do not have direct contact.
- Expensive renovations and repairs may be needed, especially if the property is in a location prone to squatters and vandalism.
- You must consider Australian tax laws, local property taxes, insurance, management costs, ongoing repairs and hidden costs.
Consumer Affairs Victoria also gives the following warning about property investment seminars:
- Do not sign anything until you understand what it means and agree with it.
- Keep copies.
- Be aware you are likely to be invited to enter into a legally binding contract but may be given little time to consider any questions or concerns you may have.