I have long avoided posting adversely about The Investors Club out of respect for Derek and other advocates of their service. I have decided to now post my opinions and assumptions regarding information available through their website.
Information in bold and italics is from ‘The Investors Club’ website.
The core principles behind The Investors Club plan are:
1. Each investment property must involve minimal cash outlay;
This involves using all available equity and borrowing at the maximum LVR possible. The potential risk here is being stopped cold from making additional investments should the property values drop slightly. A drop in prices also prevents sale of assets in difficult times when funds are needed as a negative return will result and compound the situation.
2. Property selection is critical;
I think this is just common sense. Nothing special here.
3. Every property must be as close as possible to positive cashflow from day one; and
Looking through the properties offered for sale through their website, I do not see any off-the-plan properties that will even come close to positive cashflow. This is certainly the case in the available Sydney properties.
4. Never, never sell.
It is pretty hard to show a capital loss if you never sell. I guess that those who do sell are not counted in the figures of satisfied customers because they did not follow the ‘core principles’. There is always a situation that can arise where selling some or all your properties is required.
I wonder if holding a property for 50 years with capital growth of 5% in that time would be considered a successful investment according to the ‘core strategies’???
Leveraging off these core principles, the Club adds to the potential financial success of members through removing the ‘middle man’.
The ‘middle man’ is replaced by The Investors Club and, in some cases, is in addition to the ‘middle man’ according to the website property listings where a listing agent is still involved.
This minimises unnecessary additional costs associated with purchasing a property.
Real Estate Agents do not add a fee to the sale of off-the-plan properties. They receive a commission on the sale price. The only benefit to The Investors Club members might be a slightly cheaper price due to quantity of sales through the Club.
If the Club services are offered as ‘FREE’, this is totally misleading as commissions come from everywhere (property sale, finance, etc). I am certain they do not rebate 100% of commissions to Club members. It also seems apparent that members receive a commission or some other benefit for referring new members due to the emphasise on going through them to join up. This has the stench of multi-level marketing attached to it.
In ‘normal’ property transactions, there is a seemingly never-ending list of expenses associated with the sale, such as:
* Real Estate Agents;
* Expensive newspaper ads; and
* Expensive promotional material.All associated costs are priced into each unit price. As all the properties I saw on the website were not offered exclusively through The Investors Club, the expensive newspaper ads and expensive promotional material mentioned are still costs of marketing to non-Club members and are still priced into the cost of the property to all purchasers. Just look at some of the aerial shots and artwork presented in the property descriptions – these are not cheap!
As mentioned previously, some of the properties offered have Listing Agents. These Agents do not work for free and I am certain the Club gets a cut from their commission or a commission on top of the Agents commission.
In situations where there is no Real Estate Agent, The Investors Club becomes the Agent and takes a commission. After all, it is a requirement in most States of Australia to be licensed to deal with selling property and I am sure The Investors Club would never break the law intentionally.
At best, a buyer will receive a slightly cheaper property if the Club is willing to drop their commission or if they can negotiate a better price due to quantity sales through the Club as previously mentioned.
When a member of The Investors Club purchases a property, none of these costs are involved.
Absolute rubbish for the reasons outlined above.
Generally the vendor accepts slightly less than they would otherwise have received but they get a much faster turnover.
And here is where the only benefit may arise. A Club member will get a “slightly” cheaper price for buying through the Club instead of an already over-inflated price buying directly or through another Listing Agent.
In my opinion, the properties I saw on the website today offered for sale are of poor quality.
They are available through most agents selling ‘off-the-plan’ properties so Principle 2 is out.
They will not come close to ‘positive cashflow’ so Principle 3 is out.
Lenders are moving away from high LVR’s on these types of ‘off-the-plan’ properties so there goes Principle 1 out the door.
As for Principle 4, well, one out of four is not bad I guess. You would never sell these types of properties unless you wanted a capital loss in many instances.
I look forward to hearing many ‘real’ experiences from Club members.
Robert Bou-Hamdan
Mortgage AdviserIt seems as though everyone is too scared to respond publicly about my comments above. I have received a few emails now telling me of some bad stories which I cannot divulge.
I would love it if those people would post some of their comments here to share with all or give me permission to do so for them (anonymously). My email is not working right now so I cannot send but I can receive.
Robert Bou-Hamdan
Mortgage AdviserRob,
Our group have very little nice to say about Kevin’s Investors Club. Have a read of page 2 of the standard handout and how tightly the whole show is wrapped up legally…don’t even think of taking part of the action. Forget the actual company name that runs the show really…it’s on page 2 anyway. Think it begins with an L.
We’ve been to about 5 or 6 meetings now, in 3 different locations around Perth run by varying people over a period of about 4.5 years now. I went 2 months ago and took the wife along, and we both commented that the guy up the front speaking dolling out the advice had been in the game half as long as we had and had only just cracked the 1 MM mark – gross not equity…
To tell you the truth the last couple of times we’ve gone to give ourselves a little boost and pat on the back, thinking “Thank God we aren’t investing this way”. Although, I shamelessly admit to enjoying the free cup of tea and cream bikky provided at the end when the hard sell is put on. With a mouth full of biscuits I seldom have the opportunity to put my foot in also.
The message is the same every time and you get the feeling sitting in the audience of being condescended to by people who have far less experience. You also get the feeling of being part of a big revolving door, where fresh meat is brought in and sifted for the few who take a bite. All done very nicely of course…not saying they aren’t all lovely ‘nice’ people…by sincere Mr and Mrs Averages who stand up and say upfront they aren’t clever, aren’t trained professionals or salesman and don’t have any relevant qualifications and none of the following is advice….following which is a mountain of legally non-binding advice !!!!
Being a ‘Support Member’ after purchasing 2 units over a time period of 9 months worth a total of $ 180K does not make me warm and fuzzy.
Everyone has a bunch of questions from the audience always probing the “What’s the catch”, which are dealt with by their standard list of published answers…but I always cringe when they all stand up the front at the end and say “If you can all just turn to the second last page which is the ‘Finance Enquiry’ page”…everyone in the room eagerly turns to it and then the pitch is made.
They continually repeat that there is no “Pressure”, but it is applied, and the serious ones who stay for a chat after get the Finance Enquiry form shoved down their neck.
Oh, and forget about 2nd hand properties – i.e. not brand spankers straight from the developers mill…very small cut for Club and strongly discouraged…even though that’s where, IMO the growth is due to the larger land content. You’ll be convinced to buy new and take the depreciation benefits – hence the “Never never sell” mantra as all of the Dep. benefits are lost if you do.
I am yet to meet a IC member (and I’ve met 100’s over here in the West) who is truly wealthy…maybe they all live in Qld where big Kev and Kathy are.
Having said all that, if you are a complete novice and have not a clue about PI and want to be lead by the nose all the way through the maze of PI, it may have some merit…but…after a few years you’ll probably look back on your Club properties, with a wiser eye and realise they weren’t the best thing going at the time.
Anyway – nuf said…I’ll get down off my soapbox.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Dazzling stuff Dazzling!!!
I have yet to hear a good story about these guys.
Anyone????
I am still concerned that all these people are selling real estate and giving advice without being licensed. I don’t care how many disclaimers there are, it just cannot be done legally in my opinion. Maybe ASIC or Fair Trading should take a look???
Robert Bou-Hamdan
Mortgage AdviserSorry for this really long post but I think it is important as part of many investor’s due diligence to know all the facts.
The more I look, the more it worries me. Here are some interesting quotes available at:
http://www.travismorien.com/FAQ/ripoffs/scquack.htm
Bear in mind that many seminars have audience plants, so if you see some enthusiastic true believer in the audience dressed in a suit and offering up inane questions then this may be the case. I saw such a gent at an Investors Club seminar and Amway meetings always are full of them.
“The Investors Club obviously are trying to appeal to people with this whole “nice guy” routine with their name. Although The Investors Club is in every sense of the word just another property marketing company, calling themselves a “Club” falsely implies that they are not a for-profit organisation whose sole raison d’être is to make Kevin Young incredibly wealthy and hopefully prevent him going bankrupt again.”
And then this from:
“03-028 ASIC secures undertakings to protect investors
Wednesday 29 January 2003
The Australian Securities and Investments Commission (ASIC) has secured undertakings to protect investors in two Queensland-based, allegedly unregistered managed investment schemes, ahead of an urgent trial on 10 February 2003.
The undertakings were provided by company directors Mr Kevin Young and Ms Kathleen Clair Young, The Investors Club Ltd, Lisson Pty Ltd, Self Help Investors Group Pty Ltd and Club Loans Pty Ltd (the four companies) in relation to the two schemes, ‘Joint Venture Projects’ (JVP) and ‘No Tenant? No Problem? Program’ (NTNP).
The undertakings were provided to the Supreme Court of Queensland. The two schemes, JVP and NTNP, are operated by The Investors Club and its associated companies, which ASIC alleges act in breach of the law.
The undertakings by Mr Young, Ms Young and the four companies include that:
they will not borrow money from the public or members of The Investors Club in relation to the JVP and NTNP schemes, pending the final resolution of proceedings;
they will not to accept further investments in JVP or NTNP schemes, pending the trial or earlier order;
pending the trial, they will not encumber any property in respect of the JVP scheme, excluding payments to the builder in respect of the 8/10 Lloyd Street, Southport development;
no unit will be sold by them to any member of The Investors Club or any other person or entity relating to the JVP scheme (excluding the 8/10 Lloyd Street, Southport development);
every Friday up to the trial, they will provide details of any monies transacted with members of the public relating to the JVP and NTNP schemes.
ASIC alleges that The Investors Club, a property club which offers members property investment opportunities through the JVP scheme and a rental guarantee program through the NTNP scheme, is in breach of the Corporations ActASIC also alleges that the Youngs and their four companies carried on the business of providing financial services to consumers, even though they have never held an Australian Financial Services License.
ASIC had sought the appointment of a Receiver however due to the urgency of the matter the Supreme Court was satisfied with undertakings and the urgent hearing of the trial.”
And this:
“03-093 ASIC obtains orders winding up Queensland property schemes
Tuesday 25 March 2003
The Australian Securities and Investments Commission (ASIC) has obtained permanent orders in the Supreme Court of Queensland against Mr Kevin Young, Mrs Kathleen Young and the four companies of which they are directors, The Investors Club Ltd, Lisson Pty Ltd, Self Help Investors Group Pty Ltd and Club Loans Pty Ltd (The Club).
The orders relate to the operation of two unregistered managed investment schemes, and the offering of financial services without an Australian Financial Services Licence (AFSL).
‘This action has been taken by ASIC to protect the interests of investors and to ensure that schemes which are being run in breach of the law are removed from the market’, ASIC Director of Enforcement, Mr Allen Turton said.
The Club is a Queensland-based property club that offers members throughout Australia and New Zealand property investment opportunities and services that include the Joint Venture Projects (JVP Scheme) and the No Tenant? No Problem? Program (NTNP Scheme).
Mr Justice Muir made permanent injunctions restraining Mr and Mrs Young and the four companies named above from further promoting or operating the JVP Scheme and the NTNP Scheme, or any substantially similar scheme.
The Court also ordered that the JVP Scheme and the NTNP Scheme be wound up by the respondents, under the supervision of ASIC.
ASIC’s costs are to be paid by Mr and Mrs Young and the four companies.
The injunctions and orders for winding-up followed declarations by the Court that the JVP Scheme and the NTNP Scheme were managed investment schemes which had been operated in breach both of the licensing provisions, and the managed investment provisions of the Corporations Act.
‘Under the law, managed investment schemes must be operated by a responsible entity, namely, a public company that holds an AFSL, and must comply with the managed investment scheme provisions of the Act. The rights of investors are only fully protected when a scheme fully complies with the law’, Mr Turton said.
This Media Release supersedes and replaces previous Media Release 03-093 which also referred to these various orders.
Background
On 24 January 2003, ASIC obtained undertakings from The Investors Club Ltd and its associated companies, and Mr and Mrs Young, which prevented them, pending final resolution of the proceedings, fromthem borrowing money, or accepting further investments in relation to the JVP and NTNP Schemes.The respondents also undertook not to encumber any property in relation to the JVP Scheme, or to sell any units to people or companies associated with the scheme, subject to certain exclusions.
On 21 February 2003, the court made preliminary findings that the JVP Scheme and the NTNP Scheme were unregistered managed investment schemes and that appropriate orders would need to be made after further submissions. needed to be wound up
The matter was adjourned to enable the parties to negotiate a process for winding up the schemes. As no agreement was reached, Mr Justice Muir made subsequent orders to wind up the schemes after further submissions were made to the court by both parties on 5 March 2003.”
Robert Bou-Hamdan
Mortgage AdviserHi Robert
I am what you all call a “lurker”. I read the posts from time to time and often smile at the wide variance in advice and opinions. Sometimes it really scares me to see how bad investing advice is hailed as great and other times I nod knowingly at some gems of wisdom.
I must say that I have to congratulate you on your take on TIC. And, as for Dazzling, it was all summed up in that brilliant point about the success of members.
I do feel, though, that you are likely to get a legal missive from Klever Kev.
Take it easy, guys
Leo
Hi Leo,
I am not concerned by any legal proceedings. I have merely stated my opinions and concerns supported by excerpts from other websites. I don’t think they will challenge me when ASIC has already publicly stated similar comments and won in Court.
It is interesting reading stuff about these guys. I see comments in various places about over 6000 properties settled and not one complaint to ASIC or Fair Trading. I guess Court proceedings do not count as an unsatisfied client if they don’t make a formal complaint.
I might become the next Jenman. This is fun!!!
)))Robert Bou-Hamdan
Mortgage AdviserHi TMA
in your Honest Opinion and for the benefit of those people who struggle to understand the world of property investing and are fearful of taking the first step, what would you propose they do?
I would’ve thought the Investors Club was the better of the bunch out there for a newcomer, especially someone who doesnt have the time or interest that we do..
I’m interested in a Pro-Active approach for newcomers from you rather than a reactive..
i’ve still never been to TIC meeting (the days they are on don’t fit my schedule) but i’m sure it’d be interesting[blush2].. i loved Dazzlings post and i’d be interested to hear Dereks opinion or others from TIC on this topic.
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorHi Red,
In my honest opinion, I think newcomers should stay right away from organisations like this. They portray themselves as those helping others but it is so clear to those who know that they would not be wasting their time if they were not making a lot of money.
The ‘Support Member’ structure is of interest to me as I expect they get a ‘cut’ (commission) from all sales made to those they ‘support’. This means that some properties would pay a profit to the developer, a commission to the listing agent, a chunk to The Investors Club and some more to the Support Member. This whole structure also resembles a multi-level marketing structure with the various levels.
Regarding The Investors Club being the “better of the bunch”, this doesn’t say much to me. Imagine you were looking for an accountant and you had a choice of 4 people. 3 of them embezzled more than 1 million dollars each and the 4th only embezzled $100,000. Would you choose the 4th because they are the “better of the bunch”?
Please note that I am in no way suggesting The Investors Club is embezzling anything!!!
I would love to attend a few meetings myself but I am concerned that a brawl may ensue if I challenge their ideals in front of prospective ‘suckers’… I mean ‘members’. As for being called ‘members’, this is also ridiculous. They are just clients or customers like anyone buying a property through a real estate agent (albeit an unlicensed one).
Now that the “reactive” is out of the way
, time for some “proactive”.I believe newcomers would be much better served participating in forums like this, meeting with the various FREE groups that are around, reading informative books (not the ‘Get Rich Quick’ crap), reading through the very informative and FREE Government support websites and finding themselves a good ‘Support Team’ to support them which would include an Accountant, a Financial Planner, a Solicitor, a Mortgage Adviser and other related, licensed and sometimes required support personnel.
Take this forum for example… do a search on almost any topic and you will most likely find numerous hits. Some of those may be incorrect and some may be spot on. I would suggest a newcomer print off anything that catches their eye and then take it to their ‘Support Team’ for verification and suitability checks.
There are also numerous people here willing to help others without expectation of payment or other benefit. All anyone has to do is ASK. If you never ASK, you will never know!!!
I would like to see a new section created on this website just for newbies and those who enjoy helping them. This would end the ongoing criticism that newbies face when asking what some perceive as a silly quesiton or one that has already been asked. It may also shake off the fear of criticism that many newbies experience. Those who get annoyed should just stay out of the NEWBIE SECTION!
I hope this post was ‘reactive’ and ‘proactive’ enough. I like to mix it up a little!!!
))Robert Bou-Hamdan
Mortgage Adviser[winking]Thanks TMA
Both Reactive-Proactive and with a dose of honesty thrown in..[biggrin]
With the accountants and having to choose the better of the bunch you’ve recommended, i’d have to go with one of the three..the fourth is obviously no good at his job [laugh4]
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorI thought that myself (re accountants) after I posted. hahahaha
Robert Bou-Hamdan
Mortgage AdviserRob’s analysis of TIC is excellent. It is one of the best I have seen and all budding investors would be wise to heed his wisdom in this instance.
Perhaps he read the report in one of the papers last year which contained this quote…
“The Investors Club is nothing more than a pretend form of organisation to sell overpriced and overvalued real estate to unsophisticated and gullible purchasers.
“It is a scheme where someone buys a geographic area or zone and gets called a club manager. They become your m e n to r, and show you how to buy property. They get a kickback from each property you buy. By definition that makes a pyramid selling scheme.”
I think the Pyramid is bit harsh. I thought more MLM. I know there are different levels people move through as they sell more. I just wish they told everyone what they were… JUST ANOTHER ‘GROUP’ (‘REAL ESTATE AGENT’ IF LICENSED) WHO REGISTERED A COOL NAME AND MARKETS WELL TO UNSOPHISTICATED INVESTORS.
Robert Bou-Hamdan
Mortgage AdviserSeeing Derek is finally back, I thought I should bump this thread up.
The Mortgage Adviser
http://www.themortgageadviser.com.au
[email protected]
Essential Links
)))
You must be logged in to reply to this topic. If you don't have an account, you can register here.
