Expert Advice with Jeremy Sheppard. 15/02/2016
- Real estate agents
- Property educators
- Property developers
Note that all of them are trying to sell you something. There’s nothing wrong with that, so long as you get value for money. Since they can’t hide the cost of what they’re selling, their only option is to pump up the value. And they use some clever mind-trick-marketing to do it.
Let’s have a closer look at property educator spruikers.
Here are some educator catchphrases and their corresponding reality:
“Retire on $100k in 10 years” → “Starting with a mil in savings, retire on $100k in 10 years”
“Anyone can be a property millionaire by taking my exclusive course” → “Nobody’s dumb enough to fail, but nobody’s smart enough to do it without paying me $10,000”
“My dream is for you to own 6 homes” → “My dream is to make $6k from each attendee”.
Note that if “anyone could do it” and every Australian did do it (buy 6 homes that is), then vacancy rates would be at 83%.
Nobody in their right mind would spend $10,000 on a course with content that’s either freely available online, or available in a set of half a dozen books worth around a couple of hundred bucks.
So property educators need to take people out of their “right mind” and into the spooky realm of imagination:
- “Imagine working only because you want to”
- “Imagine paying for your children to go to the very best schools”
- “Imagine being on holiday all year round”
This is all presented around imagery of flash cars, nice homes, a yacht, suits, jewellery, etc. in case you couldn’t picture it yourself.
If you make millions implementing what you learn, then the tens of thousands you spend on the course will seem like nothing, right?
It’s not that easy
When I was a property noob I swallowed a lot if this material. The reality I discovered over the next decade of property investing was that property investing is actually not that easy. In fact, being successful at investing is pretty much like being successful at anything – it’s really hard.
You need the education as a starter. But you also need to be driven to keep learning. You need to be driven to put it into practise too. You need to work hard like you would at anything you want to achieve: weight loss; a degree; relationships; sport; career;
I wouldn’t say “anyone” can do it like those pushing their course do. And doing it well versus average is the difference between ordinary and successful.
You need a lot of time to see in hindsight how some actions were mistakes. A lot can go wrong property investing. You need time to financially recover from those mistakes and also learn from them so that going forward you only make new mistakes.
It takes a long time to start reaping rewards. Don’t think that a single weekend seminar will transform your life in a few years.
Unless an educator makes big claims, they won’t lure in potential customers. And the bigger the claims, the bigger the price tag they can charge – so long as you believe it.
For every positive testimonial a property educator publishes, there might be a dozen or more failures. Don’t believe the hype, it’s not that easy.
My accountant's 2c
Here are some things that annoy my accountant about these educators:
- Their systems often assume constant capital growth. They may not consider long flat periods of no growth, let alone prices falling
- Their systems are often reliant on tax deductions. If negative gearing and depreciation are important to its success, steer clear.
- Their systems are often reliant on the investor keeping their job. Being forced to sell undoes a lot of hard-earned wealth.
How to protect yourself from spruiker educatorsI recommend educating yourself. I recommend reading as many books as possible. I also recommend paying for property investment courses. But there are a couple of simple tips to ensure you don’t get burnt by them…
Don’t value the course based on what you believe it will earn you. If it’s only a weekend course, why does it have a semester’s price tag?
Ensure there is a lifetime money back guarantee and make sure you claim it if things don’t starting looking rosy within a couple of years. Hopefully the educator will still be in business then to pay you back.
Keep in mind my accountant’s advice mentioned earlier. Anything focussed on tax like negative gearing and depreciation or assuming constant capital growth should be treated with caution.
If you know a newbie investor, you might like to pass on some of this to them. Let’s strangle the spruiker space by sharing as much genuine education as possible.
J Jeremy Sheppard is head of research at DSRdata.com.au and LocationScore, both are specialist property investment research company that provides research software platforms in the Australian property market. He’s naturally an active property investor and a self-confessed property-data nutcase!
Jeremy bought his first investment property in 2002. By 2009, he had amassed a portfolio of 16 properties in both Australia and New Zealand. Some of his purchases doubled in value in less than 3 years without any renovation, subdivision or development.
DSR data can be found on the YIP Top suburbs page.
Click Here to read more Expert Advice articles by Jeremy Sheppard
Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.