Given the current crisis in the housing and mortgage markets, you would think that the days of the buy-to-let property seminar were over. Sadly, the reverse is true. Despite the collapse of property club Inside Track earlier this year, plenty more outfits have arrived to fill its place.
All that's changed is the marketing spin: "Profit from the property crash!" "Exploit the falling price of property!" "Make money buying repossessed properties!" "Earn a fortune because of the credit crunch!"
These slogans, and dozens like them, are used in advertisements to lure would-be investors to free property seminars. It doesn't matter if you have never owned property before, or rent your current home. It doesn't matter if you are unemployed, a student or retired. It doesn't matter if you are in the UK on a visa. You don't even need any money. As one advert succinctly puts it: "All you need is the desire to make more money than you could ever dream of".
I'm soft - where do I sign?
Posing as a naïve punter, I enrolled on a large selection of free seminars – all of which were free 'taster sessions' for a longer course, costing from £1,500 to £5,000, where I would "unlock the secrets of successful property investment". My first aim was to uncover the methods that seminar companies use to lure would-be investors into signing up. Secondly, I wanted to test the robustness of the advice delegates end up paying for in their desire to get rich quick.
The results, detailed here, are shocking - both in their wilful exploitation of the financially vulnerable, and the dangerously high risk strategies they suggest.
The majority of the outfits concerned classify themselves as educational companies, teaching the techniques of property investment, as this bypasses the need for FSA regulation. Most come with their own brokers, solicitors and agents attached – no doubt on commission - although they are always 'independent' and not directly employed. You can choose to use someone else, but they won't be able to grant you access to the same exclusive deals. One company even suggests you should use its preferred broker to say 'thank you' for making you rich.
Free seminars are typically held on weekday mornings. Chatting to delegates, many are unemployed, have recently been made redundant or are new to the UK. All say they need money – fast. Although they cannot afford to buy a house for themselves, they can still become a buy-to-let landlord. I lose count of the number of times I am told: "The income multiple needed to buy an investment property is zero as it is all based on rental projections."
Another phrase common to every seminar I attend is "financially free". One presenter defines this as "paying for your lifestyle every month without having to work". Another favourite is "passive income", used to describe the ease of collecting rental payments. Somehow, being the landlord of umpteen properties doesn't involve any work. "Get up on Monday, and you can go back to bed if you want to," I am told by one seminar host. The subject of property maintenance is never touched upon.
Risk? What risk?
Nor is any serious discussion of risk. Dressing up highly dangerous methods like buying with credit cards, bridging loans or foreign currency mortgages as the 'secrets' to unlocking a fortune is clearly irresponsible.
Worse, buyers are actually encouraged to maximise their risks. One seminar company advises attendees to go home unless they commit to buying a minimum of four properties. "If one tenant moves out, the income from the other three will sustain you," the presenter advises.
Another outfit simplistically explains leverage as "using other people's money to make you rich". The prospect of negative equity is never entertained, and falling house prices are blamed on overblown media speculation. Then there's the ubiquitous PowerPoint slide showing the upwards sloping curve of average property prices since 1945. The implication being, if you hang onto a property for long enough, it will double in value.
The delegates I encounter absorb this information blindly, and many of them sign up for the expensive courses on offer. But it stands to reason; if I possess the secrets of making a fortune through property, why am I wasting my time running a two-bit seminar company?
It goes without saying that there are some legitimate companies out there giving buy-to-let landlords investment advice, but considering the lack of regulation in the field, the onus is on consumers to weigh up the risks.
