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Property Spruikers Exposed: Sales Tactics, Target Markets & Red Flags (Bonus) · The Follio Property Podcast

• 0:00
  My mum was a nurse, dad was a small builder in the country of Victoria and they've worked bloody hard for the last 50 years to build their retirement and they don't have a lot in super, probably not enough to live on. They are the target demographic of these spruikers. Speculative assets, unsolicited advice, vulnerable clients,
• 0:16
  We can make a couple of mistakes now and still set ourselves up, hopefully for retirement. Mum and Dad can't. They're super as their retirement fund. If they make one bad decision with that, that's game over. That's where I get really concerned. Why do they pick these asset types? They're getting $80,000, $90,000 commissions to put these clients, to invest the client's money into these asset types. They're doing 260 purchases a month. That's insane to manage that. There's not enough stock out there.
• 0:46
  You're listening to the Folio Property Podcast. I'm Rhys Bettle and I'm here each week with my co-host Lachlan De La Hunty. Lachlan, we did it. We hit 5,000 subscribers before Christmas, 5,500. So thank you to everyone that listened to this antidote at the start of the episode, which we thought they didn't. Yeah, you asked for it and they delivered. So thank you. It does help. It does help. Help spread the word.
• 1:09
  It spreads the word and it helps educate people because we do pride ourselves on this podcast being educational. And that's what today's all about. And we encourage you to share it and continue to like and support if you can, because the more people who can hear this episode, particularly today, won't go through the pain and suffering that some investors are about to go through over the next couple of years.
• 1:29
  Absolutely. And before we kick off, so the next target, we want to increase the five-star ratings on Spotify. We've had a big uplift in the last couple of weeks since we started talking about this. Now, we've seen the Spotify wrapped. You probably haven't seen this yet, but did you know we had 2,000 people? We were the top 10 podcasts.
• 1:50
  1,000 were the top five. We've only got 75 five-star reviews. So the play is any of those 2,000 that were in the top 10 or any of those 1,000 that were in the top five, give us a five-star rating.
• 2:01
  I think that's a fair request. It is a fair request. Rhys puts a lot of time and effort into this, so please support him. He does. All right, let's kick it off. And this episode is off the back of an episode that was meant to be our last in December, but we had such passionate feedback and we actually had some more stories off the back of it. And it wasn't necessarily the whole subject that we spoke about, but it was particularly on property spruikers.
• 2:26
  And these dodgy operators out there giving unsolicited advice. And we both had a conversation after and we wanted to unpack it again and just solely focus on this and try to raise awareness.
• 2:38
  Yeah, off the back of my trip to Victoria when we were looking to hire some buyers agents on the ground that this reared its head in probably the ugliest form I've encountered. So first thing I did, Rhys, was give you a call and said, we need to. We need to get this out to the public. And I encourage this episode today is for those to share. I'll be certainly creating today's podcast, a gift to mum and dad and the small community in country of Victoria to listen to this. Totally.
• 3:08
  hopefully give them some insight as to what to look out for to encounter a spruiker because their sales tactics,
• 3:16
  my gosh, it took me to another level in terms of what an average punter, typically an uneducated punter when it comes to looking at investing in property, would encounter. And they've got no chance. These sales systems are that good. So I pledge you share this with, for me, it's for mum and dad and the small community in country of Victoria to listen to this so they don't get sucked down the trap of making a really bad decision. If you've got someone who's
• 3:42
  potentially vulnerable in the age bracket and or the demographic that will be targeted, please share it with them. Your friends, your family, your parents, this is what it's aimed for because they are targeting those with super. So typically elderly people getting closer to retirement that are vulnerable because they're not as educated.
• 4:00
  And, you know, specifically those between 45 and 60 with at least $200,000 in super, they are the target demographic of these spruikers. And that become really apparent in this visit. We'll unpack everything, but I think what would be the most powerful is let's talk about the scenario that you heard from this person that you interviewed in terms of one of these agencies. Yeah, I didn't know how comfortable, and we spoke about this before, how comfortable I felt sharing it because it's sort of,
• 4:28
  We went over there, we're looking for A-grade operators in Melbourne to join our team to buy properties, buyers, agents and investment advisors. And it's hard to find good people that you can honestly back to make sure they do what's right for the client always. And this is something that we've always spoken about, how do you know those operators and you get a good sense and you can interview and reference check, et cetera. But this gentleman who was...
• 4:53
  By all means, a really good guy. And he was coming to us because he knew the companies that aren't doing the right things by their clients. So he's working for one of these companies that we probably deem a spruiker. And what he's witnessed in the last three months is he's got to the point where he's not comfortable. Not only does he know that they're giving...
• 5:12
  unsolicited financial advice, which legally they can't do, giving advice on super, et cetera. But the type of assets that they're getting recommended and the sales process to get them through that funnel has got to the point where he really doesn't feel comfortable, even though
• 5:27
  the money he will make is four to five times the money we could ever potentially offer him to come across and work in our business. He can't sleep at night because of the decisions he's made on behalf of his clients under this, under this business. And it's not the advice that he wants to give. It's the directive that he has to give. And it sounds like from there, we're talking speculative assets, unsolicited advice, vulnerable clients that are potentially looking at their superannuation with those age brackets.
• 5:56
  So let's break it down to asset selection. What sort of assets are they looking at and why are they speculative? When he joined, the advice was they were buying house and land packages on out of fringe areas.
• 6:08
  very much what we deem as degrade suburbs, where there's high supply, low demand, and low infrastructure of metropolitan areas. So for us in Western Australia, that would be like a two rocks. In Victoria, it would be West Melton, where there's an abundance of supply. These areas which...
• 6:30
  in an upswing can represent some level of value, but are the first to see significant losses when the market turns. And often even in an upswing, we've seen these particular assets underperform in comparison. So again, go into areas where there's high volumes, because these type of businesses are purely looking for volume. They want to place, they're doing 260,000,
• 6:54
  purchases a month. That's insane to manage that. There's not enough stock out there. We're a buyer's agency business. There's months where we find it very difficult to transact because the quality of stock that we buy just doesn't exist, right? So there's a national shortage. They're trying to create supply by going out to areas where there's an abundance of it, which he could somewhat justify because we have seen those areas perform in the last two years because we've been in the most undersupplied market Australia's ever seen.
• 7:22
  Where that's turned is now they're going to buy these off-the-plan apartments in very questionable suburbs where they're paying often 20% more than what market value is. Going into assets and off-the-plan assets that won't be constructed in the next two to three years will be oversupplied, but they're paying 20% to 30% more than what you can buy that's already established. So we always talk about we like assets where the replacement cost is more than what we're paying for assets.
• 7:50
  They're buying 20% to 30% more. Example was a two-by-one bedroom in a very questionable suburb of Melbourne on the outer fringes paying $830. You can buy an established house in that suburb for that price. So that's when you're starting to get concerned into the quality but also the quantity that they'll buy and they'll go in there and buy in the entire complex. So how does that make sense? The entire complex is going to be full of investors like these land belt areas they're buying.
• 8:17
  So that was the first red flag. Why do they pick these asset types? Because they're easy to purchase because they're abundance. They're obviously linked up with a deal with the developer. They'll get massive, massive clips, often 5%, 6%, 7% returns. They will get paid. So for instance, if they can sell them for $800,000, they'll likely get a 6% to 7% return.
• 8:38
  cash back to the business for that, for placing that client into that asset. So at what point is that ever going to be in the best interest of the client when you're getting paid 7% from the developer? Sometimes more. There's evidence of up to 10%. So they're getting $80,000, $90,000 commissions to put these clients, to invest the client's money into these asset types. And we haven't even had a conversation about this, but
• 9:03
  I would say a week I get five or six emails or LinkedIn messages from developers trying to push this stock to us because they say, obviously, we've got a bit of a profile. They understand what we're doing. Every day I get three calls. I've had to now change phone numbers because we get calls from developers wanting us to place clients in this stuff. And there's no way. I can't sleep at night. And what's the golden rule? You never advise a client to buy something you wouldn't buy yourself. They defy that because it's a pure volume game. But it gets far worse.
• 9:33
  Okay, so these are the asset types. Let's talk around their target market. We've mentioned they're going to be people that are more vulnerable. But what's the target market? That was what was really interesting. It was the sales function. Because I spoke a bit about our business and typically broadly we've targeted probably more sophisticated investors that have a base level of understanding of property.
• 9:57
  And we've never targeted nor do we give advice on super. First home buyers probably hasn't been a market for us historically.
• 10:05
  What was jolting was the fact that they don't want anyone with any level of sophistication or education around property. They want the most vulnerable demographic. He said their target market, their pure target market is first time investors, have never had any exposure to the market, so completely uneducated, and those closing in on retirement, which made me sick.
• 10:27
  Because that is the demographic of mum and dad who have worked the last 50 odd years, very modest careers. Mum was a nurse, dad was a small builder in country Victoria and they've worked bloody hard for the last 50 years to build their retirement and they don't have a lot in super.
• 10:47
  Probably not enough to live on, but certainly they are the target demographic of these guys. And the reason they are is because they use that fear. Like some of the buzzwords when he's going through the sales process is they use fear as the number one motivator to get these clients to invest in their products. And the way they do that, the pitch is they'll run through their spreadsheets. And I'm just visioning. Like this is what makes me sick and so angry recently. Why we have to talk about it is...
• 11:13
  I'll sit down with mum and dad, hopefully at a kitchen table, if not on Zoom, and get them to fill out their information, get them to put in their super contribution and how much they've got, their balance, and then demonstrate that they will not have enough to retire on. And really let them sit with the fact that they're probably, you know, two to three hundred K short from what they need to actually live comfortably in their retirement. Regardless of what they have, they'll manipulate the figures to make that.
• 11:41
  Or they're 10 years, you know, they're going to be left with 10 years with no money. So all of a sudden, someone like mum and dad are going to sit there and, you know, start to panic and start to really question what they've done for the last 50 years, what they've provided for their family. And they'll put the fear of God into them. So then they say, well, you need to do something. The worst thing, Rishi, you can do is nothing.
• 12:03
  But they don't pitch anything, they don't sell anything, they just let them sit with that. They'll end the first meeting there. So imagine that poor mum and dad, they've had a hard day at work, they've come home, had a meeting on Zoom, 5 o'clock, and they've just had a 30 to 40 minute consultation with a property expert, completely suited up, been sent a brochure to show how many years experience he's had and he's an expert in the industry. And they've just been told they don't have enough to retire on. They'll also set it up
• 12:33
  with you will speak to people about this and their responses will be
• 12:40
  They start to caution what their reactions will be. Essentially, your friends and family, your children will say, you're going to be okay, or they're going to say, don't speak to them because they're a spruiker. And they'll do that because they care about you, Rhys, and they'll do that because they don't want to see you get ahead because tall poppies are big things in Australia. So straight away, they're starting to plant some seeds of what's going to come because the first thing mum and dad will do is call me, and the first thing I would say is, I don't know.
• 13:04
  Are you serious? Don't, that's a scamp. It's a scamp. Like these things are scams. And you'd think they'd take my word for it considering I've been in this industry for a long time. But they've already answered that and they've put enough fear in there. They're like, he was right. He did say that I'll speak to people and maybe my son does love me and he's got my best interests at heart. But he doesn't realize, Lachlan doesn't know that
• 13:26
  We don't have enough and we're a bit embarrassed. People are embarrassed about their financial situation often because there's always someone else who's got more money than them, no matter who you are in the world unless you're Buffett or Elon. There's someone better off. So people are naturally embarrassed about their current situation because someone's doing better. So then mum and dad ponder on that. Sit with that overnight.
• 13:46
  And one thing that sat with me, their job, their sales process is to make sure that they keep the speed of conversation at quick intervals. So what I mean by that, they don't let you sit with it for any longer than 24 hours because you'll speak to too many people and then you'll lose momentum. So straight away, you booked in for a call tomorrow. So you've sat with it for 24 hours, Rhys. I wonder if I'm going into so much detail, but I just want to make people understand the process in case they counter it. I'll sit with it for 24 hours, come back, have another meeting with you. So they haven't let you sit with it too long because they don't want you to speak to too many people. Okay.
• 14:17
  please talk to me. What did you think about our conversation yesterday? And obviously they're going to come back and they're going to be petrified. Yeah, we're concerned. And they'll talk about, look, they've done okay, but they haven't done enough. And the worst thing you do is nothing at all. And then they'll double down and go through the numbers again and make them more fearful. Make them more fearful of the point there, like we have to do something. And then they'll start to drip feed some solutions around the figures. No asset.
• 14:44
  At no stage do they talk about the asset itself, what they're buying, but they'll talk about solutions around what they need to achieve their goals. So what you need, Rich, you're going to need a 7% return on a 4% to 5% yield for the next 10 years to get yourself to financial freedom.
• 15:00
  And that's good. To someone like mum and dad, they'll just be nodding their head, have no idea what they're talking about. So they bamboozle them with the figures, put them in the spreadsheet, make sure it's absolutely individualised to their situation and show where they can be in year 10. Still haven't spoken about the asset. And then they're like, okay, that's exciting. I'm interested. I'm interested. I'll let you sit with that, Rhys. We'll book another meeting in tomorrow. So now last night...
• 15:25
  We didn't have enough to retire. It was a horrible night. We fought about it all night. Shouldn't have gone on that holiday. We don't have enough money, those sorts of things. Tonight, we're upbeat. There's some hope. There is some solutions out there. And then tomorrow, it's time to close. So they bring you down, break you down, break you down emotionally.
• 15:42
  be consistently contacting you as well to be checking in to make sure, you know, you're not, not getting told it's a scam. You're not deviating. You're not deviating. And at no point they're talking about data in terms of where to buy. Asset hasn't been spoken about yet. And it doesn't get spoken about. And the plan is to get them on board before they even start talking about where they're going to be. 100%. Committed financially before they've even spoken about asset. So do you want to come on this journey with me, Rhys? Yeah.
• 16:11
  to change your life, to change your financial position, to give you enough to retirement.
• 16:17
  sign me up. I just think David Della Arnie sitting right there, you know, his glasses are fogging up. He's that excited. So where do I, where do I put the pen and tape of Reese? Yeah. And so they've committed to not even know what they're committed to. Yeah. And then, and once they're committed, they're excited, need to keep the pace going. Cause straight away, they're one, this is one phone call away from derailing. Dad's one call from picking up me saying, shut this down before I shut it down yourself. So the next meeting, once you've committed,
• 16:45
  Two hours later, we're booking you in for the property. We're booking you in for the acquisition strategy. And during that strategy, we talk you through several different strategies that all lead to the same product. And it's.
• 17:01
  Off the plan, house and land, or what I'm now getting more concerned with, off the plan apartments in high density areas. And it's regardless of your preconception, they create this narrative. It's a good idea. It's not about the asset itself. It's about the fundamentals, about the data. It's about research.
• 17:19
  And it's that convincing. It's a, the assets like it's a two and a half hour meeting. I imagine sitting in a meeting, but I can't sit in the studio for, for more than 40 minutes race. Imagine sitting here for two and a half hours, someone just pitching, pitching, pitching to the point where it's just like, it's, it's information overload and they've gone through that much data. They must know what they're talking about, but it's just a fugazi to get them then to sign up.
• 17:42
  already committed financially from the day before, now sign up, sign the contract at sale to commit to an off the plan apartment that's gonna be built in two to three years and paying 20 to 30% over market value with often no finance pre-approval in place. We can work that out, we've got three years to work out the financing solutions. So it's just, and their narrative from top down, right?
• 18:11
  CEO level, you spoke about it before, is to shorten the sales timeframe because at any point in time, they can speak to other people. So they want to get this high contact frequency points. I'm going to call you every day in a booking meeting every second day to get you from the
• 18:30
  start to finish in the shortest amount of time possible and commit to as many properties as possible. They're not getting you to buy one property. Often it's two, three, four assets off the plan in the same transaction. That's how they get their multiples from one deal to four in the same person, same mom and dad, same super balance. To buy four properties in that same conversation. And the whole time they're reinforcing the feedback they're gonna get when they speak to other people.
• 18:59
  And they answer that. You're going to speak to people. They love you. They care for you. That's why they're going to give you advice. They don't want to see you get ahead. They don't want to see, you know, tall poppy. They don't want to see you get financial freedom. Everyone wants to keep everyone. That's why they're going to say it's a bad idea. But you know, the worst thing you can do, look at the markets for the last five years, the worst thing you can do is nothing. Someone like mum and dad have no chance.
• 19:23
  And it'd be interesting to see what data they are showing because different example, I've looked through similar operations like this. And the data that they're actually showing, it's almost just a marketing pitch. So what I mean is the one I constantly was seeing on a Melbourne was they were just showing how many kilometres where they're buying in West Melton.
• 19:47
  how many Ks it is from a city, and then showing a ring around Sydney, which is what, medium house price over 1.6 mil now, and saying, well, Sydney's at 1.7 mil for this house, 70 Ks out, so this house over here, that's where it's going to go, which maybe it does.
• 20:02
  Maybe it does get that far, but that can't be the right data set to be looking at. That's pure. And I was seeing things of like news articles. Let's compare classes in New York and pull that back to regional Victoria and draw some synergy. But like from my background to marketing, from a marketing standpoint, you're like, oh, okay, this does make sense. But you've got to be looking at what are the core data sets in there. Is it just...
• 20:24
  things like that that are actually just trying to paint a narrative about what their gender is rather than what is actually the core data saying from a growth perspective. Today's episode is not going to be for everyone, and people might be saying, well, this is common sense. I'd never get sucked into such a scheme, but it may not be for you. But I know you know people that will benefit from this, and one –
• 20:48
  One text message says, just have a quick listen to this. And this is for mum and dad and for people in my community. After our last episode, Reece, which is born in this episode, I had a family friend actually from the small town I'm from ring up to thank me because they were midway through, midway through committing to an off-the-plan apartment
• 21:07
  different firm than the one we're discussing today, but a similar operation. And almost broke down and she's like, I was so close to committing. And the reason it sort of sat with me for so long, it's like, I'm like, why didn't you speak to someone? You know, they don't, everyone's quite sensitive, particularly in towns and in friendship groups. They don't share, older generations don't share a lot because they're either embarrassed or they don't want to know if they are getting slightly more ahead financially. They want to keep that to themselves.
• 21:37
  or if they've made the wrong decision. And this was what she'd done. She didn't want to call me out of embarrassment of the other things she'd purchased without us. And I said, don't like, just give me a call at any stage. And she's like, I felt bad because I didn't use your service. I said, please, we're not here. And this podcast is not here to self-fulfill our business. It's to educate people mainly, I think, just to not make mistakes like this.
• 22:00
  She got quite overwhelmed and upset because she felt like she'd let me down. I said, you haven't, I promise you. And you don't, before you purchase anything or sell anything, make sure just give me a call. And five minutes of my time, maybe I have to save a really bad financial decision and she was able