Misleading Accountant Advice!

[magsie23]

Question - started going to an Accountant who jammed NRAS properties down my throat (and others that I'd introduced to them) - and being na?ve followed their advice on SPECIFIC one they wanted me to buy.
I think they were in on a deal with the developer; long story short but those of us who bought under their recommendations have lost over $60K each.
Is this a case of misleading/unregulated advice for an accountant?
Would love any thoughts as feel so duped.

 

[Scott No Mates]

Lost $60k? capital loss? negative geared loss? fell down the drain lost? Paper loss or realised?

How did you assess the investment?

What numbers did you run?

 

[dan c]

Question - started going to an Accountant who jammed NRAS properties down my throat (and others that I'd introduced to them) - and being na?ve followed their advice on SPECIFIC one they wanted me to buy.
I think they were in on a deal with the developer; long story short but those of us who bought under their recommendations have lost over $60K each.
Is this a case of misleading/unregulated advice for an accountant?
Would love any thoughts as feel so duped.

It really depends on the type of advice that was offered and whether the accountant is licenced to offer financial advice. Developers do offer deals to accountants (and others) to introduce clients who maybe interested in investing in a property. Unfortunately there are accountants out there who take the kick back, the amount is usually a reasonable amount and it clouds the advice.

First thing you should do is find a new accountant.

My other thought is that you've been given a tough lesson here. Always always always do your own research when making a significant investment such as this.

I realise the accountant is probably a trusted advisor (which makes the deception worse) but in the end it is your decision and your money.

If the accountant is a member of one of the professional bodies, (CA, CPA) you can make a complaint to the organisation, but getting an financial compensation would be very difficult, almost impossible.

 

[Rixter]

Lost $60k? capital loss? negative geared loss? fell down the drain lost? Paper loss or realised?

How did you assess the investment?

What numbers did you run?

What, beam me up, asks above ^^..

 

[Macca]

New accountant and legal advice is my suggestion

 

[Rolf Latham]

Id suggest there is a bit more to it than just an accountant/adviser recommendation..................

To "get away" with a 60 k real capital difference ( im making assumptions) requires more than a recommendation.

It requires the finance to be set up in a particular way and a few other things

I have had clients where NRAS vals have come in 70 k short on a 400 buy, yet they still proceeded...............

ta
rolf

 

[Paul@PFI]

Property is not a financial product. To sell to you may need a real estate agent license but he will argue he just introduced you to that party.

Credit advice requires a license. This is where you may have an action.

However of greater damage is his professional membership. His body can investigate and determine if he acted contrary to his professional body and rules. He may have given incidental advice for which he was not qualified, licensed or received commissions etc which were undisclosed. His advice may be uninsured too. They may find he was induced by the fees he could receive and didn't act in your interests but his own. If that causes a loss to you as you trusted him you may well have a claim.

Speak to a lawyer. There are many who offer no win, no fee arrangements who may offer consult to determine its likelihood of success.

You also need a new accountant. I have never recommended NRAS and don't sell property. Its a conflict. IMO I think NRAS is lender of last resort housing and its only for astute investors who will never "need to sell" in the short / medium term. Unfortunate that many NRAS spruikers sell the side benefits and ignore the underlying requirements of quality property with a quality income stream.

 

[Terry_w]

Yes you may have a legal basis to sue and/or report the accountant to their professional body and alsot to the tax agents board. Was any commission disclosed? You may have further actions.

 

[Paul@PFI]

Yes you may have a legal basis to sue and/or report the accountant to their professional body and alsot to the tax agents board. Was any commission disclosed? You may have further actions.

Its not a tax agent service. The TPB would fob it off.

 

[Redom]

Question - started going to an Accountant who jammed NRAS properties down my throat (and others that I'd introduced to them) - and being na?ve followed their advice on SPECIFIC one they wanted me to buy.
I think they were in on a deal with the developer; long story short but those of us who bought under their recommendations have lost over $60K each.
Is this a case of misleading/unregulated advice for an accountant?
Would love any thoughts as feel so duped.

Was this purchased via an SMSF?

How did you get the valuation of the property to match the contract price at the time of purchase?

I've seen my fair share of dud NRAS deals and some really shaddy operators - as Rolf said, its not that uncommon to see a 60k shortfall in valuation from the outset.

Add to it, there's an NRAS trading market out there (or at least there was). This effectively adds no 'value' to the underlying asset, but increases the price as theirs more middle men involved charging exorbitant commissions. What happens is developers go and 'purchase' NRAS incentives from some consortium for say 5k, and load up the property price by 40k as a result. Its dodgy and ASIC have made some serious efforts to stop this behaviour.

For accountants and planners - they get seriously incentivised by the shaddy operators to shove this down their clients throats. The clients trust their advice and then purchase into the cash flow strategy and end up purchasing well above market value. While I don't have a problem with this per-se, the client should know what the bank valuation is and what the market valuation is and then decide whether the incentive makes it worth it.

If any of the above sounds like its happened to you, i'd be getting some legal advice about next steps.

 

[Xenia IM]

nras properties are just overpriced no matter who is recommending them.

The best person to take advice from is yourself!
Self education is key - what works for one person does not work for another.

Let accountants do accounting - never ever rely on anyone for advice again!

 

[Redom]

IMO I think NRAS is lender of last resort housing and its only for astute investors who will never "need to sell" in the short / medium term. Unfortunate that many NRAS spruikers sell the side benefits and ignore the underlying requirements of quality property with a quality income stream.

Great advice Paul, although i'm not too sure what you mean by the above and feel obliged to clarify for information's sake.

NRAS can work, and when utilised within the right structures (e.g. valuations holding, vacancy risk low, right consortium models, in metro areas, at the right price points, etc), can be a very powerful play.

It is relatively simple to sell and there is a growing NRAS secondary market out there. In terms of liquidity, apart from a small transaction fee associated with transferring the incentive (~$500) its as tradeable as any other property investment.

Cheers,
Redom

 

[Redom]

nras properties are just overpriced no matter who is recommending them.

This, as a blanket statement, is not true.

Plenty of NRAS properties are not overpriced. Talk to euro73 if you want a suburb by suburb profile of investments where valuations have met market price.

 

[Rolf Latham]

nras properties are just overpriced no matter who is recommending them.

Meh

Its a generality thats true, BUT the reality is in the detail as always

we have quite a few where the vals have been hunky dory, and some where they have been out by near 20 %

ta

rolf

 

[euro73]

nras properties are just overpriced no matter who is recommending them.

The best person to take advice from is yourself!
Self education is key - what works for one person does not work for another.

Let accountants do accounting - never ever rely on anyone for advice again!

Sorry - but with all due respect, your comments regarding all NRAS approved properties being overpriced are really unhelpful, and really irresponsible. Yes there are scoundrels out there selling all new property (nras or not) to silly, sucker first time investors via 1990's models with gigantic comms , and NRAS has and continues to form some of what they do - but your comments are not helpful.

This has been covered over and over again on the forums. We get it. There are many rip off merchants shoving overpriced NRAS approved properties down the throats of unsuspecting buyers... just like there are scoundrels shoving house land/smsf /dual occupancy deals down the throats of unsuspecting investors. I , moreso than most, am acutely aware of this. And I , moreso than most, have posted extensively on this subject. After all, I designed the first ever NRAS loan product available in Australia, and without trying to sound all conceited and too cool for school, it's more than a little likely I have seen more NRAS loans or property sales than anyone else in the land, since 2008. In other words, I think I have a fair idea what Im talking about on this particular subject.

I work really, really, really, really, really hard at making NRAS a great experience for all my clients, so they get out of it exactly what they should get out of it - a property at precise, fair value with exceptional cash flow. I go out of my way to ensure my clients do not spend $1 more than they need to to get the results I often post about on these forums. This involves doing multiple, multiple, multiple pre valuations on all the NRAS properties I work with before I agree to take them on. But beyond telling you all of that - which you may or may not believe - the simplest way for me to demonstrate that I am not all opinion, but rather all fact , is this; I've sold more than 300 of them in the past 2 years and have only ever had one valuation shortfall, and it was for @ 10K . And I tried to talk the client out of that purchase. Now by any measure, I think that puts a serious burst in the bubble of your argument.

 

[Xenia IM]

Ok
.............

 

[datto]

"Look here, you just stick to crunching numbers and let me decide which property to buy. Understand?"

Magsie, just copy and print several copies of the above. The next time a bean counter starts trying to flog you a property just hand him a copy. You will save yourself a headache.

 

[Paul@PFI]

Great advice Paul, although i'm not too sure what you mean by the above and feel obliged to clarify for information's sake.

NRAS can work, and when utilised within the right structures (e.g. valuations holding, vacancy risk low, right consortium models, in metro areas, at the right price points, etc), can be a very powerful play.

It is relatively simple to sell and there is a growing NRAS secondary market out there. In terms of liquidity, apart from a small transaction fee associated with transferring the incentive (~$500) its as tradeable as any other property investment.

Cheers,
Redom

Ignoring NRAS spruikers of course IMO I always feel NRAS properties aren't prime tenants and owners retain a long term risk to the income stream (ie its houso housing). A buyer needs to understand THEY are assuming tenancy risks that non-NRAS housing also has (foolish to think it doesn't) but its a higher risk. Perhaps not substantially higher but has to be higher. The risks may not appear when renting - Just when selling - Or both.

The NRAS incentive is there to compensate that risk through encouraging private investors to invest in low income housing that the govt doesn't want to do...(Low income is the first problem) That speaks volume for the risk. That's my lender of last resort comment. Poor private investor may be burned now or in ten years. Is the offset etc enough ?

I wish NRAS came with the DHA refit benefit. The NRAS refit cost v's non-NRAS repairs hasn't had time to prove itself. Is the marginal NRAS benefit sufficient to cover a refit cost of $XXX in 10 years ?? Maybe me but I think of TV's houso's and cringe thinking of damage / wear costs. How do you cherry pick a good tenant ? You cant. Their rental history is protected. Yes they always paid their rent. $35 a week. How will they pay $220 ? Who will move in with them ? They often have job insecurity, habits and mental health issues too. That a owner cant ask about.

Selling an NRAS property has to be a harder sale for any REA v's a non-NRAS in same street. Or in cases where its a large % NRAS suburb the property val and liquidity has to be considered. It has to be harder to sell NRAS. Meaning seller may have to cut price when they want out (quickly or not ?)

Hope I don't come across as anti-welfare. Not intended. I think NRAS is a good. I just question if the benefits are conservative

 

[vaughan]

... Maybe me but I think of TV's houso's...

Great documentary.

 

[westminster]

Ignoring NRAS spruikers of course IMO I always feel NRAS properties aren't prime tenants and owners retain a long term risk to the income stream (ie its houso housing). A buyer needs to understand THEY are assuming tenancy risks that non-NRAS housing also has (foolish to think it doesn't) but its a higher risk. Perhaps not substantially higher but has to be higher. The risks may not appear when renting - Just when selling - Or both.

The NRAS incentive is there to compensate that risk through encouraging private investors to invest in low income housing that the govt doesn't want to do...(Low income is the first problem) That speaks volume for the risk. That's my lender of last resort comment. Poor private investor may be burned now or in ten years. Is the offset etc enough ?

I wish NRAS came with the DHA refit benefit. The NRAS refit cost v's non-NRAS repairs hasn't had time to prove itself. Is the marginal NRAS benefit sufficient to cover a refit cost of $XXX in 10 years ?? Maybe me but I think of TV's houso's and cringe thinking of damage / wear costs. How do you cherry pick a good tenant ? You cant. Their rental history is protected. Yes they always paid their rent. $35 a week. How will they pay $220 ? Who will move in with them ? They often have job insecurity, habits and mental health issues too. That a owner cant ask about.

Selling an NRAS property has to be a harder sale for any REA v's a non-NRAS in same street. Or in cases where its a large % NRAS suburb the property val and liquidity has to be considered. It has to be harder to sell NRAS. Meaning seller may have to cut price when they want out (quickly or not ?)

Hope I don't come across as anti-welfare. Not intended. I think NRAS is a good. I just question if the benefits are conservative

Paul, NRAS is not housos. The income limits for NRAS applicants is so generous it's not funny (can be over $100k!!). Therefore the majority of tenants are not Centrelink recipients (or housos) but working lower to middle class people.

You get to select the tenants and therefore can approve the one you deem the least risky, just as you would with any IP. I don't get why you say that their tenant rental history is protected - these applicants have to fill out of a full rental application, in fact it's more comprehensive as they need to prove they fall with in the income limits.

When it comes time to sell you can sell WITH or WITHOUT the NRAS benefits. You can opt out of the scheme at any time.

Edit to add the income limits which once in a NRAS home can increase by 25% until they are no longer eligable

https://www.dss.gov.au/our-responsi...ility-scheme-nras-household-income-indexation