Warning; Investors Club

[Perp]

They are both wrong, but to Neil she's less wrong than them. So who do you put your support behind? The ignorant chick, or the people selling her the property at the inflated price?

I don't think it's that black and white. At the point that she was left holding the property, one could make a case for her position. But now that TIC have bought back the property at purchase price plus costs plus some, I think it's a bit rich to "maintain the rage".

If she'd made a heap of money, she'd be happy, as are (apparently) at least some other TIC clients. It sounds to me like the only thing TIC did wrong was have, amongst their portfolio of possible investments, some properties that under-performed, and Christine (unfortunately) chose one of those. TIC have now gone "above and beyond" in rectifying that, anyway.

What could TIC possibly have done to prevent this situation? Given that poorly performing investments are an inherent risk of investing, and that their commissions etc are fully disclosed, it seems that the only thing that TIC could have done was say "sorry, Christine, but you're too stupid and ignorant to invest with us"! Is that what Jenman would recommend they do in future?

I've never had anything to do with TIC and I don't plan to. I just think that people running legitimate businesses should be encouraged in this country. The service TIC provides may not be something that most SSers would want to use, but that doesn't mean that it's not a legitimate business. A poor-performing investment is not evidence of unethical business practice, bad faith, or excessive fees or anything shonky (necessarily); it's evidence that they're not 100% successful in their investment recommendations, and I don't know a person or organisation on the planet that can pick 100% winners.

Financial advisers don't cop anywhere near this level of flak when they recommend buying shares that go down the toilet - why are people promoting property apparently held to a different standard?

 

[boomtown]

Tracey

What 1 bedroom unit would have been worth $314k in 2001?

I dunno maybe its possible but its seems waayyy out of whack to me.

 

[Dazz]

it's evidence that they're not 100% successful in their investment recommendations, and I don't know a person or organisation on the planet that can pick 100% winners.

Trouble is, when you walk into their seminars / sales pitches....that's exactly the impression they give you. I've been rolling up to these events for 9.5 years now, and not once have they ever portrayed anything other than they are absolute gurus at turning complete novices into property investing legends...and spend most of the evening proving as such.

Yes, they are not successful in all of their picks, and yes they promote some pretty god awful properties that don't grow and lose cash woefully.....but they never mention any of those things.....she's full steam ahead, with many novices standing up proudly saying that they have been investing with TIC from scratch for the past 18 months, have 3 -CF units now under their belts and they are well on their way to retirement.....hmmm.

Anyway, as you say, it's not for everyone, but they apparently do have a place in the market.

One thing I can attest to, when you can grab an investing novice off the street and show them a glimmer of hope, with lots of surrounding empathetic senior investors with 2 or 3 little units, wrap it up into a red sleeve brigade with associated rankings and little social gatherings, you have the makings of a fervent loyal following that will trudge the end of the Earth singing your praises.....and by golly they have an army of folks doing that....so it must be all good - right ???

 

[Perp]

Look, no doubt about it, I think Christine made a bad purchase. But what are you (LA Aussie/Marc, Dazzling/Darryl, boomtown/Tae) proposing either could or should be changed to prevent people making poor investment decisions?

Do we only allow people to invest in property and/or shares if they pass some kind of test?

Do we regulate the market, with the government fixing prices?

Do all people who recommend investments - financial advisers, real estate agents, property developers, etc - become liable to guarantee 1) the capital invested, 2) costs, and 3) the opportunity cost of not investing in something more profitable? That's what Jenman's proposing, and I don't think there's a precedence for that kind of guarantee on any investment, anywhere in the world, at any time in history!

 

[Sailesh Channan]

Tracey

I agree with your line of thinking. The responsibility falls back to to investor for their investment decisions.

I do however think that the so called educators should point out the risks involved in investing while trying to educate on the risks of not investing.

As we all know, share market has blue chip shares and the penny dreadfuls the same applies to real estate. Unfortunately a lot of the first time investors are attracted to the cheaper stock which carries more risk.

May be the government should legislate that people read this forum before investing.

 

[BayView]

Look, no doubt about it, I think Christine made a bad purchase. But what are you (LA Aussie/Marc, Dazzling/Darryl, boomtown/Tae) proposing either could or should be changed to prevent people making poor investment decisions?

Do we only allow people to invest in property and/or shares if they pass some kind of test?

Do we regulate the market, with the government fixing prices?

Do all people who recommend investments - financial advisers, real estate agents, property developers, etc - become liable to guarantee 1) the capital invested, 2) costs, and 3) the opportunity cost of not investing in something more profitable? That's what Jenman's proposing, and I don't think there's a precedence for that kind of guarantee on any investment, anywhere in the world, at any time in history!

I don't know the answer Trace; I wish I did. Regulation is definitely not the answer though; you end up with no free market.

I've made some nice financial mistakes through ignorance myself; I reckon anyone who is still in the game and still punching will have too, and will have learnt from them.

I reckon the education needs to happen more at grass roots level - junior high school; around year 7 or 8 when kids are a bit more switched on about money. They all know how to spend it by then.

Having said that, I think you need to work on your own kids as soon as they can spot the diff between a 50c piece and a 5c piece, but it's no good doing that if you are clueless yourself about finance etc.

 

[yo yo ma]

Do all people who recommend investments - financial advisers, real estate agents, property developers, etc - become liable to guarantee 1) the capital invested, 2) costs, and 3) the opportunity cost of not investing in something more profitable? That's what Jenman's proposing, and I don't think there's a precedence for that kind of guarantee on any investment, anywhere in the world, at any time in history!

Nice post Tracey... regulating the market more is not the answer. I think companies such as TIC, have an obligation to warn people of the risks involved with property investing. From Dazzlings experiences, I really doubt this is happening.

 

[Dazz]

I think Christine made a bad purchase. But what are you proposing either could or should be changed to prevent people making poor investment decisions?

I can only speak for myself in this regard, but I am not proposing anything at all. I have no wish to jump on his bandwagon, or hers for that matter.

I have scant knowledge of her case and absolutely none of the finer details....so far there has just been "an executive summary" presented.

I'm a great believer of adults standing up and being counted....taking full responsibility for their actions and decisions. Unfortunately, my opinion goes against the popular grain in this regard, and especially against the swath of advisers, agents, brokers, consultants and legal fraternity who all feed off people's lack of knowledge and due diligence in a particular area. Some people are encouraged to call these folk their "trusted team".

People hand over responsibility to these people, but fail to read the fine print of the disclaimers and lack of any responsibility taken via the contracts entered into. People want their hand held, but there is no set of handcuffs tying them to their adviser when they go over the cliff.

Not a problem when things turn out swimmingly....it's only when the brown hits the ventilation that you find out that you are truly on your own.

 

[evand]

You didn't mention that TIC make money from their advice and and so does everyone on your list.

Therefore they should have a duty of care in their recommendations but somehow that minor consideration has been overlooked in the unregulated environment (or minimal regulation) these guys work in.

Look, no doubt about it, I think Christine made a bad purchase. But what are you (LA Aussie/Marc, Dazzling/Darryl, boomtown/Tae) proposing either could or should be changed to prevent people making poor investment decisions?

Do we only allow people to invest in property and/or shares if they pass some kind of test?

Do we regulate the market, with the government fixing prices?

Do all people who recommend investments - financial advisers, real estate agents, property developers, etc - become liable to guarantee 1) the capital invested, 2) costs, and 3) the opportunity cost of not investing in something more profitable? That's what Jenman's proposing, and I don't think there's a precedence for that kind of guarantee on any investment, anywhere in the world, at any time in history!

 

[Perp]

May be the government should legislate that people read this forum before investing.

Amen to that!

Having said that, I think you need to work on your own kids as soon as they can spot the diff between a 50c piece and a 5c piece, but it's no good doing that if you are clueless yourself about finance etc.

Our kids' school is doing their great annual project at the moment, where they run a "virtual economy", as the focus of their term's learning. They have to vote in a government. They float their currency and monitor how inflation happens. All the kids earn money by working in the post office, hospital (offers bandaids, ice packs, and foot massages!), bank, or for cleaning up at school etc. They can also apply to operate a business licence; businesses include food sales, games (simple throw the coin in the cup, a scary tunnel made out of fabric, etc), fortune telling, selling photos taken around school, home-made toys, etc. They spend 8 weeks of term learning age-appropriate material about societies, and in the last two weeks their society operates. In those last two weeks, they spend the mornings preparing their businesses and doing classwork, and the "shops" and services open for two hours each day after lunch. It's a hoot!

Back to the point... my 7yo sons each have a business. One is selling soup, the other choc chip cookies. (Both home-made with their help; you have to value-add to a product, you can't just sell something you bought elsewhere.) Both seem to have grasped the entrepeneurial spirit. One is selling soup for 30 BISmarks (their currency) per cup. Somebody wanted half a cup, and he agreed to sell them half a cup for 25 BISmarks - and they agreed

The other son has a friend who's not allowed to have wheat, sugar, dairy... fun This little girl kept walking past the cookies and finally decided to give in to temptation - to heck with Mum! - by which time all the cookies were gone. My incredibly compassionate son let her have the crumbs - for 5 BISmarks (A cookie was 20 BISmarks.)

 

[Ausprop]

You didn't mention that TIC make money from their advice and and so does everyone on your list.

Therefore they should have a duty of care in their recommendations but somehow that minor consideration has been overlooked in the unregulated environment (or minimal regulation) these guys work in.

not quite correct, TIC are agents working for the vendors, where as everyone else on the lsit works for the buyer. hence the duty of care is primarily to their client (the vendors) and limited to the buyers (to act reasonably, disclose material facts etc).

 

[evand]

ok, thanks for the correction re TIC. I didn't think they were acting as agents.

not quite correct, TIC are agents working for the vendors, where as everyone else on the lsit works for the buyer. hence the duty of care is primarily to their client (the vendors) and limited to the buyers (to act reasonably, disclose material facts etc).

 

[Ausprop]

ok, thanks for the correction re TIC. I didn't think they were acting as agents.

well they won't admit to it as they arent licensed. they merely introduce the parties

 

[boomtown]

We know the apartment cost $314k in 2001. We know that was significantly overpriced (well we dont actually know that but its pretty obvious that it was).

I am sure that TIC represented itself to Christine that it would find her an apartment which represented great value (at that point in time in 2001).

Christine relied on TIC's representations which induced her to enter into the contract. TIC failed to live up to its representations (at that point in time in 2001) because its pretty obvious that the apartment was not sold to Christine at fair market value. What happens afterwards is irrelevant because there appears to be a serious problem at the time of sale and that is sufficient.

Christine may have a cause in action under the Trade Practices Act for fraudulent misrepresentation or similar (although it is unlikely that she has the ability to fund that action). You will note that TIC bought the property back after she finally got a lawyer involved - they ran scared.

In short TIC quite possibly broke the law (by breaching the TPA). Im all for self responsibility but I do not blame the victim in circumstances where the perpetrator has broken laws at the time of the transaction.

The reality is that there are people in our society that need to be protected from sharks and I am a supporter of regulatory shark fencing (even if it somewhat incoveniences me at times) because I benefit from that legislation as well (for example the Consumer Credit Code). For example there are of people out there that dont know how the rule of 72 works - and they dont have to because of the Consumer Credit Code.

 

[Dazz]

TIC are agents working for the vendors, where as everyone else on the lsit works for the buyer. hence the duty of care is primarily to their client (the vendors) and limited to the buyers (to act reasonably, disclose material facts etc).

...and this is where I have a real problem with TIC...(if you haven't cottoned on as yet )

When you swan in there to one of their meetings, everyone is very pleasant, very casual and inclusive. Everyone from the convenor, to the support members giving the talks and the red sleeved brigade standing on the sidelines are all so "we're on your side, we're here to help, we were just like you 18 months ago, and if you don't buy something off THE LIST then we will".

Of course, you aren't actually shown THE LIST until you formally submit all of your confidential information to big Kev's plaything L..... Pty Ltd via their form at the back of the handout. They call it a FEF, a financial enquiry form.

See, once you're in the Club, (and they won't let you in unless you buy a property off them) you get bombarded with Club loans, Club finance, Club maintenance, Club PM's, Club leasing co-ordinators, Club insurance, Club solicitors, Club building inspectors.....I mean these guys are classic. Everything is cheaper and better and just tickety-boo when you are in the Club. private landlord's don't stand a chance against the weight of numbers and machination we've got going. Yeah - right....but your properties are rubbish. The CG is rubbish and the nett yield is even worse.

Up front loading the purchase price of the product by at least 6% to absolute newbies who know no better and have just decided to rock up cos there was nothing good on the TV that night.

At no point during the show and tell session do they declare that they are flogging off developer's residential cast-offs that the developer's couldn't flog off themselves.....and that in fact the Club, which isn't a club at all, is contractually on the exact opposite side of the contract to the punter's walking in the door.

Sometimes, I'm completely floored by some of the conversations had around the urn after the formal spiel, where all of the hard networking and convincing is done. It frustrates the living hell out of them when you ask to see THE LIST, as the first step in the chain is always that blasted FEF....without it the Club does nothing and drops you like a hot potato. You cannot buy a property off them without submitting everything about yourself financially to them.....and why on earth would you do that to the opposing side of the contract when purchasing property. Over in WA - the whole show is run by the South African contigent....there's not an Ozzie amongst any of them.

Way smarter people than me have complained to the authorities and got nowhere, for many reasons, the main few being that the Law governing these property ventures is really loose indeed and almost impossible to pin someone down. When push comes to shove, everything is declared and disclosed, but it's very fine print and not in any way reflective of what goes on at their presentations and tea and bikkie session afterwards.

Anyway, I'm tired of this unproductive subject, begone TIC.

 

[Rixter]

...and this is where I have a real problem with TIC...(if you haven't cottoned on as yet )

When you swan in there to one of their meetings, everyone is very pleasant, very casual and inclusive. Everyone from the convenor, to the support members giving the talks and the red sleeved brigade standing on the sidelines are all so "we're on your side, we're here to help, we were just like you 18 months ago, and if you don't buy something off THE LIST then we will".

Of course, you aren't actually shown THE LIST until you formally submit all of your confidential information to big Kev's plaything L..... Pty Ltd via their form at the back of the handout. They call it a FEF, a financial enquiry form.

See, once you're in the Club, (and they won't let you in unless you buy a property off them) you get bombarded with Club loans, Club finance, Club maintenance, Club PM's, Club leasing co-ordinators, Club insurance, Club solicitors, Club building inspectors.....I mean these guys are classic. Everything is cheaper and better and just tickety-boo when you are in the Club. private landlord's don't stand a chance against the weight of numbers and machination we've got going. Yeah - right....but your properties are rubbish. The CG is rubbish and the nett yield is even worse.

Up front loading the purchase price of the product by at least 6% to absolute newbies who know no better and have just decided to rock up cos there was nothing good on the TV that night.

At no point during the show and tell session do they declare that they are flogging off developer's residential cast-offs that the developer's couldn't flog off themselves.....and that in fact the Club, which isn't a club at all, is contractually on the exact opposite side of the contract to the punter's walking in the door.

Sometimes, I'm completely floored by some of the conversations had around the urn after the formal spiel, where all of the hard networking and convincing is done. It frustrates the living hell out of them when you ask to see THE LIST, as the first step in the chain is always that blasted FEF....without it the Club does nothing and drops you like a hot potato. You cannot buy a property off them without submitting everything about yourself financially to them.....and why on earth would you do that to the opposing side of the contract when purchasing property. Over in WA - the whole show is run by the South African contigent....there's not an Ozzie amongst any of them.

Way smarter people than me have complained to the authorities and got nowhere, for many reasons, the main few being that the Law governing these property ventures is really loose indeed and almost impossible to pin someone down. When push comes to shove, everything is declared and disclosed, but it's very fine print and not in any way reflective of what goes on at their presentations and tea and bikkie session afterwards.

Anyway, I'm tired of this unproductive subject, begone TIC.

Daz, so why do you give up your time to them?

 

[Perp]

We know the apartment cost $314k in 2001. We know that was significantly overpriced (well we dont actually know that but its pretty obvious that it was).

I am sure that TIC represented itself to Christine that it would find her an apartment which represented great value (at that point in time in 2001)

I imagine you're right, though presumably TIC had valuations supporting the sales price, and/or the financiers valued it at purchase price.

I'm just concerned that if such an action succeeded, it sets a dangerous precedent.

Imagine then that your dear old Granny is selling her family home to go into a nursing home. The property's valued at $450K, but she really needs $500K to get into the luxury nursing home she has her eye on. She meets with the first home buyers who are interested in buying it and tells them "I know it's worth $500K. I'm sure it'll be a great investment for you in this location!" The FHBs buy it and in 5 years' time it's worth only $450K. Can the FHBs sue Granny? Is Granny a predator, guilty of fraudulent misrepresentation?

Now I acknowledge that it's different in that Granny doesn't claim to be advising the FHBs, but the common principle is that if the onus moves away from the buyer to assess whether a price represents good value, I'm concerned that there could be all sorts of undesirable consequences.

When you swan in there to one of their meetings, everyone is very pleasant, very casual and inclusive. Everyone from the convenor, to the support members giving the talks and the red sleeved brigade standing on the sidelines are all so "we're on your side, we're here to help, we were just like you 18 months ago, and if you don't buy something off THE LIST then we will".

Sounds very creepy; very much like a network marketing organisation *shudder* - there's an industry that really victimises the vulnerable. It's at least possible - even likely - that you'll make money out of property. I don't know anybody who's made money from network marketing, but I know quite a few people who have wasted loads of money and time, and jeopardised their personal relationships, chasing an elusive dream sold to them by slick network marketing promoters.

Of course they've been told from the get-go by the network marketing organisation that anybody who says that they can't make money out of it is just negative, or an unsuccessful loser. So it's psychologically very difficult to leave, because that would mean acknowledging (to themselves) that all the people who told them it was a scam were right. And 99% of people find it hard to admit to themselves that they've been conned. So they keep at it and at it, throwing good money after bad, desperately wanting to believe that success is just around the corner.

It's just bloody heart-breaking to watch.

 

[Dazz]

Daz, so why do you give up your time to them?

Same reason I come here......meet and talk to property investors.

Both are better entertainment than sitting at home and watching some Yank drivel on the commercial channels.

I've been able to meet at least 5 or 6 experienced property investors at these meetings over the years who've actually done extremely well, without ever buying off TIC. It's quite refreshing to havachat with them as they haven't been brainwashed from the start of their investing travels with the Club, the Club, the Club. During those conversations with the unwashed non-Club members I've picked up techniques and tips that have proved invaluable.

Haven't been to a meeting now for maybe 18 months, and am unlikely to go again.

 

[boomtown]

Its all fine so long as Granny doesnt pretend to be acting on behalf of said FHB. Thats where the trouble starts.

Organisations like Mary Kay make me shudder.

 

[mja]

Same reason I come here......meet and talk to property investors.

Both are better entertainment than sitting at home and watching some Yank drivel on the commercial channels.

Hear, hear.

I had a similar experience the other month, but it wasn't a property presentation.

I went to an Amway/Network21 presentation recently with a friend who wanted me to meet her mentors. Really successful people, really motivated, but have no property strategy, yet have made a motza out of N21.

I love chatting to like minded folk; it's all about the mindset.