Beware Of High-Risk Property Investments

Consumer Affairs Victoria recently warned investors to beware of what they called “high risk” property investments.

Interestingly the risks they mention may not have been the ones that first came to mind but there are some words of wisdom in their caution.

So here’s what they said:


Property spruikers are property investment promoters who often run wealth creation seminars, offering property investment training and materials, and discussing property investment often through self-managed superannuation funds.

They advertise their seminars in newspapers, and financial and investment publications.

Beware Of High-Risk Property Investments Share on X

Property spruikers target inexperienced prospective investors with promises of easy and quick wealth creation through property investment, often with very little up front or ongoing cost.

Unscrupulous operators mislead investors into paying for their advice or investing in property developments that could result in big financial losses.

Tips to protect yourself

  • Always seek independent financial and legal advice before investing in property.
  • If the claims about the returns from the scheme sound too good to be true, they probably are. Attending a seminar is unlikely to result in you becoming a millionaire property investor.
  • Check the rental yields and financial gains promised by property spruikers by seeking independent advice.
  • Be sure that you fully understand and have thoroughly considered the proposed investment before committing – otherwise, don’t invest.
  • Be particularly wary of property spruikers who advocate high risk property investment through self managed super funds.
  • Having a diverse superannuation portfolio is recommended – for more information please visit ASIC MoneySmart website and obtain independent financial advice.

Be wary of:

  • High-pressure tactics rushing you into decisions, signing contracts or paying fees (including discounts offered to seminar attendees who sign up on the day)
  • Property deals where mortgage broking, conveyancing or tax advice are supplied by the spruiker
  • Spruikers offering personal loans or credit to help you pay the enrolment fees for training
  • Property investment strategies involving that put your current home at risk by using the equity to borrow significant money to invest
  • Spruikers who don’t allow you to ask questions or ignore or downplay the risks and costs involved
  • Spruikers who suggest specific investment opportunities such as a particular property development.They may be receiving a commission for promoting the development or have an undisclosed interest in it
  • Spruikers pushing you to purchase properties interstate that you have not seen, or off the plan properties that do not yet exist.


These are transactions where the vendor offers finance to the buyer.

The buyer pays a relatively small deposit for the property and must pay the remaining balance of the purchase price to the vendor in regular instalments.

However, the buyer’s name only goes on the property title when the final payment is made.

Vendor terms sales are often promoted to both vendors and buyers who are unable to obtain bank loans due to their poor credit history or unstable employment record.


  • Always get independent legal and financial advice before selling your property under a vendor terms contract.
  • Vendors are effectively locked into an extended (long-term) settlement period, in which the purchase price is fixed although the property may increase in value during that time.
  • There may be a lack of security for the finance that the vendor is effectively offering to the buyer to purchase the property.
  • Buyers create equity in the property when they pay instalments to the vendor, however, buyers do not have access to that equity until the final payment is made.
  • A buyer’s name only goes on the property title when the final payment is made.


This variation of vendor terms sales also targets lower income earners, or prospective property buyers unable to obtain mainstream finance.

Under a rent-to-buy scheme, the buyer enters into a rental agreement with the vendor where they are charged high rent (well above market rate).

Buyers have limited legal rights if something goes wrong.At the end of the rental period they may buy the property but ownership of the property does not pass to the buyer until they exercise the ‘option to purchase’ after the rental period has expired.

Always get independent legal and financial advice, including having the contract checked, before selling your property under such a contract.

Buyer tips

  • Rent-to-buy contracts are high-risk schemes for buyers because the title of the property is not transferred to them until they have purchased the property outright.
  • You will likely be paying significantly above market rate rent and will not have any equity in the property until the full purchase price is paid.
  • The rental period may last several years and, if your circumstances change, you may be unable to complete the payments.Therefore, if you pay almost the full purchase price but do not complete the payments, you won’t get your money back and will not have any claim over the property.
  • Even if you complete the rental payments, you may still not obtain a home loan and lose not only the property, but also all of money you have spent.
  • Be aware that if you use your first home buyer’s grant to buy a property, you will lose the right to apply it to any future property transactions.
  • Some rent-to-buy contracts may indicate that you will lose all payments made and have no claim over the property, if you fail to make even a single payment on time.
  • In addition to rent payments and an option fee (for the option of purchasing), some contracts generally require you to pay for repairs and maintenance, council rates, insurance and other outgoings.
  • Potential buyers should be aware that these costs may be substantial, particularly with an older or run down property.
  • If the vendor has a mortgage over the property and fails to keep up their own repayments, their lender may have the right to repossess the property.

Vendor tips

Be aware that you will:

  • have to abide by the rent-to-buy contract and be unable to sell the property to the another buyer (perhaps offering a higher price) while the contract is in force, even if you need to liquidate your assets due to a change in circumstances.
  • be effectively locked into a long-term settlement period where the purchase price is fixed and you will lose any right to future capital growth if the property’s value increases over that time
  • remain legally responsible for the property until the buyer makes the final payment and the property title is transferred.

There are also potential risks that:

  • if you are using the rent payments to cover your mortgage, you could be left vulnerable if the buyer fails to pay their rent
  • the renters may choose not to buy the property. Therefore, there is a possibility that you will have to find another buyer after the rental period has ended.


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