The dark side of property investment: Lessons from NDIS Housing Scheme failures
In the bustling world of property investment, it’s easy to get swept away by the promises of high returns and government-backed schemes. However, as the recent collapse of NDIS housing schemes shows, these promises can sometimes lead to significant financial losses. This article sheds light on the dangers posed by slick marketers who ‘sell’ properties with enticing numbers, only to leave investors stranded when risks materialise. We’ll explore the importance of strategic planning, risk assessment, and the crucial role of working with qualified professionals. This partnership can provide you with the reassurance and security needed to ensure your investments are both safe and profitable.
The Lure of High Returns
Property investment has always been attractive for those looking to grow their wealth. The promise of double-digit returns, especially when touted as “government-backed,” can be hard to resist. As highlighted in a recent AFR article (link at the end), this was the case with the NDIS housing schemes marketed by ASR Wealth and overseen by DomaCom. Investors, including retirees, were promised up to 17% per annum returns by investing in properties intended for high-care NDIS tenants.
The Reality Check: Risks Materialise
Despite the promising returns, many investors found themselves in a precarious situation. The schemes failed to secure enough tenants, leading to significant financial losses. DomaCom’s chief operating officer, Ross Laidlaw, admitted to investors that they struggled to find suitable tenants for the properties, leading to the potential liquidation of funds tied to numerous properties. The aggressive marketing campaigns did not match the reality on the ground, where there was an oversupply of NDIS properties in certain areas, such as Cobblebank and Beveridge.
The Danger of Slick Marketing
The AFR article underscores the perils of falling for slick marketing tactics. ASR Wealth’s marketing emails described their investment opportunities as “new passive income” and “high-yield, government-backed investments,” which were extremely enticing. However, these promises were not fulfilled, leaving investors facing the prospect of capital loss after paying upfront fees and not seeing the expected returns.
Strategic Planning and Risk Assessment
To avoid such pitfalls, thorough strategic planning and risk assessment are crucial. Investors should be wary of any opportunity that sounds too good to be true. They should seek professionals who provide unbiased advice and support instead of relying on marketers with a vested interest in selling properties.
- Work with Qualified Professionals: Choose qualified advisors who operate under a property investment model focused on informed, strategic decision-making. IFP Advisory, for example, has independent PIPA QPIA®-qualified advisors who work for the investor, not the property seller.
- Conduct Stress Testing: Before committing to any property investment, conduct stress testing and modelling to understand potential risks and returns under various scenarios. This helps in setting realistic expectations and preparing for possible downturns.
- Plan for Risks: Develop a comprehensive risk management plan. This should include identifying potential risks, assessing their impact, and outlining mitigation strategies. By planning for risks, investors can make more informed decisions and avoid being caught off guard.
Realistic Expectations vs. Overpromising
One key lesson from the NDIS housing scheme failures is the importance of setting realistic expectations. Conservative assessments and modelling of potential returns are essential. Investors should be sceptical of promises of high returns with minimal risk. A realistic approach considers market conditions, potential tenant availability, and other factors that could impact the investment.
Avoiding Conflict of Interest
Another critical aspect is avoiding advisors with a conflict of interest. Marketers and spruikers often have a financial stake in selling properties, which can lead to biased advice. Trusted professionals, on the other hand, have no such conflicts and can offer objective guidance. Look for advisors who are transparent about their fees and have a track record of working in the best interest of their clients.
The Role of Due Diligence
Performing due diligence is non-negotiable in property investment. This includes researching the market, understanding the specific property investment opportunity, and verifying the claims made by any marketing material. The AFR article highlights how investors were misled by the promise of high returns without sufficient evidence to back those claims. Thorough due diligence can prevent such scenarios and ensure investors are fully aware of what they are getting into.
Case Study: NDIS Housing Schemes
The NDIS housing scheme failure is a stark reminder of what can go wrong when investors do not perform adequate due diligence and rely too heavily on aggressive marketing. Many investors, including retirees, have been left out of pocket, with some facing significant financial hardship. This case study discussed by the AFR should prompt investors to rethink their strategies and place a greater emphasis on risk management and realistic expectations.
Conclusion
The NDIS housing schemes case studies the AFR investigated offer valuable lessons for property investors. The allure of high returns can sometimes cloud judgment, leading to investments that are not as secure as they seem. By engaging in strategic planning, conducting thorough risk assessments, and working with trusted professionals, investors can protect themselves from the pitfalls of slick marketing and make informed decisions. Remember, if an investment opportunity seems too good to be true, it probably is.
The AFR (Australian Financial Review) published an article in 2022, warning of what has resulted in their 2024 article.
Article 2022 – AFR – Property spruikers feed NDIS home frenzy – 8.9.22
Article 2024 – AFR – NDIS housing schemes fail, retirees left out of pocket – 8.7.24
Here are some FAQs we are asked by investors
Q: What should I look for in a property investment advisor?
A: Look for qualifications, a track record of unbiased advice, and fee transparency. Avoid advisors with a vested interest in selling specific properties.
Q: How can I assess the risks of a property investment?
A: Conduct thorough research, perform stress testing and modelling, and develop a comprehensive risk management plan.
Q: What are the dangers of relying on aggressive marketing in property investment?
A: Aggressive marketing can lead to unrealistic expectations and investments that do not perform as promised. It is crucial to conduct due diligence and seek unbiased advice.
Q: How can I avoid investments that seem too good to be true?
A: Be sceptical of high-return promises, perform thorough due diligence, and consult with trusted professionals who can provide objective guidance.
For further insights on property investment, avoiding common pitfalls and staying informed about market conditions. reach out to John Tsoulos or Frank Pennisi at IFP Advisory on (08) 8423 6176. Your investment success depends on making informed, strategic decisions.
IFP Advisory is an Accredited ASPIRE Property Advisor Network advisor and all professionals are Qualified Property Investment Advisors (QPIA). Property investing is about purchasing a property that aligns with your goals and investment strategy. You should never be sold an investment. Know your numbers! If you invest wisely and strategically, the Australian residential property market can be a rewarding venture.
