Issue Date:  -  Thursday, 12 September 2002

Multi-property investments can cause investor ruin.

Investigate before you invest is the urgent message from the Consumer Protection Commissioner Patrick Walker.

"Various wealth creation schemes utilising multiple property investments are currently being promoted in WA and whilst not illegal, unwary consumers could find themselves in severe financial distress if they act in haste.

Buying a home is usually the biggest investment many people will make, and they should not gamble with their greatest asset," Commissioner Walker said.

The schemes advocate borrowing against the equity in existing property, usually the family home, then the progressive purchase of other properties for rental purposes. One scheme recommends buying seven properties in seven years and paying only the interest on the loans.

Consumer Protection's concerns are that these investors may be exposed to the risks associated with fluctuating interest rates, shifting property values and the changing demand for rental properties which can reduce income from these investments.

"For example, if interest rates rose, demand for rental properties fell and financial institutions were to revalue properties, investors could be left with huge debts they are unable to pay", Mr. Walker said.

Seminars promoting multi property investments often do not highlight the pitfalls, preferring to focus on the creation of wealth.

"We always encourage those looking to invest money in anything to shop around for a well known reputable financial advisor who is qualified, licensed and has no conflict of interest in the advice provided. Investigate before you invest is a very good rule of thumb, remembering also to allow some financial reserve, so you don't overstretch your ability to repay loans", the Commissioner said. Information and advice can be obtained from:

Department of Consumer and Employment Protection - www.docep.wa.gov.au, Tel: 1300 30 40 54
or
The Australian Securities Investments Commission (ASIC) www.fido.asic.gov.au, Tel: 1300 30 06 30