Property Investment Risks: Ironic ‘Supersafe’ Losses

When entering in property, there are many property investment risks that can lead honest people astray. Investing in property development companies is one of these risks that promise a lot, but can go wrong very quickly. At Property Club, we work hard so that good honest people can make profitable and secure property investments.

I have been a victim of a bad investment, and have learnt valuable lessons from it. With my experience in property investment, particularly in my current role as Branch Manager in North Western Australia and Gold Coast, I am hoping that by sharing my story that you can avoid the same pitfalls.

My Property Development Investment

I started my business in property investment 20 years ago. At the time, investing with a property developer seemed like a good way to go - high returns with less work for me.

The property developer I invested with took my money on a loan agreement to assist with development funding, and in return I would get 15% per annum paid to me monthly. It sounded great to me. So great in fact, that I promoted these developments to my friends and family - and many of them invested.

Things were great while the market was good - the developments were very profitable and we were all getting high returns. But when the market wasn’t so good, there was a bit of an issue. We didn’t have any control over what the property developer did with our money, and how they handled their development business in a bad market.

Eventually, for a multitude of reasons, the developer stopped developing, stopped building, and started using investors' funds to pay out the monthly returns. With no income from new developments, the developer turned to this method even though it was very much illegal. As you may be able to guess, the developer eventually went broke, bankrupt, and was banned from Finance Planning and operating in this industry.

What happened to the investors, myself, my friends and family, good honest people? Well the bank sold the properties for next to nothing, and we all of the investment funds - which was our equity.

Moving Forward

My husband and I lost $220,000 dollars on two investments across two different developments. This was borrowed from the equity of our home, and we are still recovering and paying for it today. My family and friends lost millions between them - some even lost their houses. Understandably, this was extremely upsetting for everyone and very difficult to recover from.

It took me a while to come to terms with whether I would ever invest again or stay in this industry. But in the end, I decided to move forward - and to take on the valuable lesson I had learned. Over the past 20 years, I have learned a lot about development and property, and I now spend my time educating and mentoring investors along their property journey.

The Key Lesson: Don’t invest in a third party - BUY the asset or property instead!

Looking back, if I had used that $220,000 dollars as two deposits on two different properties, not only would I still have those properties today, but they would have doubled in value, creating approx. $1 million in equity because of the capital growth.

When you invest your equity on a deposit for a property instead of investing in a third party, you are in control of your money and can make decisions regarding that investment.

As an example - a well located property investment will usually make 5% rental returns and 5% capital growth, making the return 10% of your initial investment. You may notice that it may not be as high as the third party investment (15% per annum) but the difference here is that you are in control of your investment. Yes, you are taking the lower return, but you will have full control and the investment will serve you for a lifetime and will not leave you broke.

Invest in property - without the risk!

Property investment is full of risks that can trip up even the most well-researched and financially savvy investor. At Property Club, we have the combined knowledge and experience of seasoned property professionals available to help you.

If you are interested in property investment, reach out to the team at Property Club today so we can help you make the right choices moving forward.