Within an hour of reading this article another investor will almost certainly have been ripped off in another dud Queensland property deal. That’s how often it happens.
While there is no official ‘Register of Rip Offs’, it’s not hard to work out the figures. Based on the number of sales made – especially to novice investors (often from interstate) – I estimate that a thousand people are ripped off in Queensland property deals every month. And that’s probably conservative.
The rip offs are quite simple. Investors pay too much for the properties they buy. And, what’s worse, the vast majority don’t know they’ve been ripped off. Some never realise it. This is especially true during a boom.
Let’s say the true value of a property is $350,000 and the naïve investor buys it for $450,000. A few years later, the property may be worth $650,000. The naïve investor has made a [gross] profit of $200,000. He thinks he’s done well. The poor chump (and there are plenty in this category) may even buy a second or third property (and unknowingly get ripped off a second and a third time).
Of course, when the market is stable (or rising only moderately) some of these investors do discover they’ve been ripped off. The discovery happens if they come to sell. They go to a local agent and are horrified to learn that the property they bought for $450,000 is only worth $400,000, at best.
Right now, especially in Queensland, hundreds of novice investors are buying house-and-land package deals. Well, actually, I think it’s wrong to say they are “buying” because that infers they acted wisely.
No, these investors are being “sold”. They are being talked into buying properties that are way over-priced, often by as much as a hundred thousand dollars, certainly fifty thousand dollars. The reason so many of these novice investors are buying is because skilled salespeople are making the buying process so easy. “Just sign here and we’ll take care of everything.”