| by Kenneth Chase | 16 comments

UK Investment Property Scams | Fake Guru’s | Property Education & Contrepreneur’s


– [Shaf] I’ve been an
entrepreneur for more years than I care to remember so that means I’ve seen most
tricks, scams and dodgy deals. Nowadays, it takes a lot to surprise me but it can still happen. I’m going to tell you a little story about something that I recently witnessed, and I want you to listen carefully, so you don’t get caught out. (light piano music) So, you guys know I mentor a couple of up-and-coming business people. One of my mentees, a clever lad who I met through in my role as
the resident entrepreneur at Strathclyde University, told me he was heading to an event hosted by the Robbie
Fowler Property Academy. Yes, that Robbie Fowler. The Liverpool striker. The one who scored 183 goals
for the club in two spells. The one who was nicknamed God by fans. Strange, as even his divine intervention couldn’t help them win the league. Anyway, I’ve always admired him. Not for his goal-scoring ability, but for his property empire. He’s built up an incredible
portfolio of property. I was interested in what he had to say so I offered to tag along. Well, can you believe it? We were going to learn the secrets of Robbie Fowler’s success,
but he wasn’t even there! Using his name was just a
ruse to get people to attend. A 20-something salesperson
addressed the room on his behalf and believe me,
what an eye-opener it was. I’ve met some pretty talented
salespeople in my life and he was right up there
with the best of them. The difference is, he was
selling the audience a dream. People desperately wanted to believe that property is an
easy way to make money. It’s not, of course, but
if they have a super-slick, charming, smooth-talking
salesman telling them that they can change their life, they will ignore the
little voice in their head that’s telling them it’s
too good to be true. We were bombarded with
pictures of investors who’d apparently followed his advice and made hundreds of thousands of pounds, if not millions of pounds. We were hit with jargon and acronyms, from BMV, below market value;
OPM, other people’s money; HMOs, houses in multiple occupancy; and of course, BTL, buy-to-let. We were given wild promises
based on dubious maths and methodology about how
much we were going to make. There was no risk, we were assured. We’d be guided every step of the way. But time was of the essence, we had to get cracking
right then and there. And then the hard sell started. “It was simply impossible
to learn everything “we needed to know in a
two-hour event,” he said. What we needed to do was sign
up to a three-day course. In fact, if we signed up
now we’d get a huge discount and it would only cost about a grand. Oh, he said, “Don’t
worry if you don’t have “that kind of money in your bank account, “just use a credit card.” A few people shuffled
to the back of the room, clutching their credit cards. Needless to say, I wasn’t one of them and I didn’t sign up for the course. But I did give them my phone number and handed out my business card to several people in that room. From that day onwards, I
have had repeated calls from people trying to flog
me property opportunities. There’s no doubt they are a nuisance, but every cloud has a silver lining, I’m going to use this series to warn you about the strategies these unscrupulous swindlers use so you don’t become a victim. I took a call recently, from someone who claimed
he was a property sourcer and a hands-free portfolio builder who helped time poor professionals like me build a portfolio to provide
long-term passive income. He then talked about a strategy which was a perfect example of something I want you to steer well clear of. The caller was cashing in on the current economic
uncertainty and pressured me to start buying as, he said,
“the property market is low.” For a fee, he would source
me awesome properties, and guess what? If I signed up for his
services right away, I’d get a once-in-a-lifetime discount. You might wonder how I know
this guy was a scam caller? For a start, when I pushed him, he really knew very little about property. I immediately got the impression that he’d only recently become
involved in property himself. The more I spoke to him,
the more apparent it became. He was regurgitating a script. Whenever I took the
conversation off-script, he became flustered and waffled. Several times during the conversation, he described himself as a professional deal
sourcer and packager. That property education courses, which teach deal packaging
and this is essentially source properties from the
internet and estate agents to package and to sell to wannabe property investors for a fee. That can range from 3,000 to 5,000 pounds. He didn’t know much about the
specific geographical areas, he was trying to sell properties in, he clearly knew nothing
about planning regulations for the changes he was suggesting to the properties he
was trying to flog me. To cap it all off, I have
a hunch that when he said he could source me property investments, all he would do would be to send me some links from Rightmove. Of course, if I had got involved with him, things would go wrong. It’s not a question of if,
it’s a question of when. I wouldn’t have had any
chance whatsoever of redress. Now, I’ve had a lot of calls from amateur property sourcers
and deal packagers before. And my simple way of getting rid of them is to say, “I prefer to work “with a proper property
professional for advise “such as a firm of chartered surveyors, “as not only would they
be RICS registered, “but if things went wrong, “I had the benefit of their PI “or professional indemnity cover.” But I decided to engage
with this particular caller as he was the first property sourcer to play on the buy low,
sell high technique and I want to look at this with you. In fact, here’s someone who can help me explain it better than me. This is Rab The Rock Star, he’s a regular in my
Speak Like Shaf series, which is also on my YouTube channel. This wee Stone Age man was
the world’s first entrepreneur when he came up with the idea of making and selling tools to help his
fellow villagers hunt prey. Like all good entrepreneurs, he didn’t just have one
successful business, he set up several. In one of them, he used the buy low, sell high strategy to his advantage. Rab was always thinking ahead, so when a travelling salesman
from the company Go Fur It visited his village one
summer’s day selling, you guessed it, animal
furs, Rab snapped them up. No one else was interested; they didn’t want to splash out on an animal fur to wrap up in. They just didn’t need
them at that time of year. Rab got a great deal, and
bought them really cheaply, and the salesman was relieved
to get rid of his stock. Fast forward a few
months, and the snow came. The villagers were freezing and
were desperate to keep warm. What do you think Rab did? That’s right, he sold all his stock for at least three times
what he had bought it for. Rab bought low, and sold high. The key to this technique, and this applies today in business as much as it did to Rab in
the Stone Age, is timing. Buying low and selling high is so much easier said than done. Do you follow the herd when it comes to buying stocks and shares? If you do, you’ll find the price rises and you aren’t getting such a good price when you are purchasing. Long-term investors know that a recession is a good time to buy as prices are low. When things pick up they sell, and they are already looking
for the next investment. When it comes to today’s property deals, I see two main problems
for amateur investors with buying low and selling high. The first is, how do
you know you’re buying at the lowest possible price? You can only know that with
the benefit of hindsight. When you’re in the process of buying, it’s very difficult to know if the market has hit rock bottom. The second problem is that
if you’re borrowing money to buy property and it
drops even further in price, you’ll be in breach of the
terms of your loan covenant. If you’re wondering
what a loan covenant is, let me explain. It’s a specified part of a commercial loan that requires a borrower to
fulfil certain conditions or it forbids them from
undertaking certain actions. It may even restrict certain activities to a time when other conditions are met. These can include the
loan-to-value, LTV, ratio, which shows how much
your mortgage borrowing is in relation to your property’s worth. The percentage figure reflects the chunk of property that is mortgaged and the amount that is yours, the equity. Some covenants won’t
let the percentage drop below a certain level. There is also DSCR, debt
service coverage ratio, and ISCR, interest service
coverage ratio, to worry about. DSCR is the ratio of
operating income available to debt servicing for interest, principal and lease payments. It is a popular marker used to measure an entity’s, person or
corporations, ability to produce enough cash to
cover its debt payments. The higher this ratio is, the easier it is to obtain a loan. In commercial real estate, it is used to determine if a property will be able to sustain its
debt based on cash flow. Interest service coverage ratio is a debt ratio and profitability ratio used to determine how easily
a company can pay interest on its outstanding debt. Covenants can be made
on both DSCR and ISCR. That all sounded very complex, didn’t it? Look, here’s Rab to help us out again. Thank goodness for this wee dude, he’s got a talent for
explaining this sort of stuff! So Rab’s done pretty well for himself. He’s bought a property for 100,000 pounds with an LTV of 70/30. That means he’s mortgaged
70%, 70,000 pounds, and 30,000 pounds himself. But what if the value of Rab’s property dropped to 90,000 pounds? To stay within the terms
of the loan covenant, he would have to give his lender 7,000 pounds to be compliant. To stay within the LTV covenant, for every 1,000 pounds drop in value, you have to hand over
700 pounds to the bank. So you can see why
getting your timing right is vital when it comes to
buying an investment property. And that’s just one
aspect of loan covenants; there are all the other
ones to worry about too! So what happens if you
breach loan covenants? Well, I don’t wanna sound dramatic but it can get very messy. The lender has several options. By the way, when I raised
the issue of property prices dropping with my scam caller,
do you know what he told me? “Oh don’t worry, as long
as you can pay the loan, “the lender won’t care,
they won’t do anything.” Actually, they do care,
and they will do something, and each potential
scenario would be enough to keep you awake at night. They can call the loan in. This means they will
make you repay it in full before the loan’s normal maturity date. They could whack up the interest rate until the loan is paid off. The property can be repossessed and sold to pay the lender’s debt with any shortfall being made up by you. Unless specifically excluded
from the loan agreement, you could be personally
liable for the shortfall. As well as losing your investment property you could lose your home. Finally, the debt could
be sold to another party. Frankly, I wouldn’t like to be facing any of these measures, would you? I patiently explained
all this to my caller, but he was very dismissive and told me it all sounded far too draconian, and a lender wouldn’t do this. He pressurised me again for payment, saying if I didn’t want to be involved, there are plenty of other people who he could source recession proof below market value property for. I was savvy enough that
I wouldn’t get caught up in this type of scam but I really worry about others who will. Looking back, this call had all
the warnings signs of a scam right from the moment my
phone started ringing. I want to highlight some of
the signs to you right now. Companies will call you out of the blue. They might cold call, text, message on social media or email you. If you engage with them, they pressure you into
making a rushed decision. This could be a limited time offer, bonus or discount if you
sign up before a deadline. Once they’ve spoken to you, they’ll call or email you repeatedly. If you are on the phone to them, they will try to keep you on the line. This is to try and keep you engaged so they can put pressure on you. Does it seem too good to be true? If so, then trust your instinct. If the risks are glossed over but the investment is high
return, it could be a scam. Another sign is they will ask you to keep the investment quiet. The scammer might tell you
the investment opportunity is just for you and ask
you not to tell anyone. The reasons for this is obvious; they don’t want a concerned family member or friend telling you not to
touch it with a barge pole. Also, they won’t be
registered on the FCA website. In the UK, a firm must be
authorised and regulated by the FCA to do most
financial services activities. I’ve been involved in
business for a long time. I’ve done over 500 million
worth of property transactions, not as a broker or as an
agent but as a stakeholder, so I know what I’m talking about but I’m sorry to say there
are a people out there who will take advantage
of you using property. I know all the potential scams, pitfalls and unscrupulous methods to get you to part with
your hard-earned money. Just subscribe to my free YouTube channel and I will tell you what to watch out for. I will never try and sell you a course, mentorship or even a book. Just watch and learn. The only thing I will
ask is that you subscribe to my free YouTube channel and share it with all your friends. I have more videos coming
up on common property scams and pitfalls so be sure to tune in. You really can’t afford to miss it!

16 Comments

Trap Town NCS

Dec 12, 2019, 6:20 pm Reply

Brilliant work! Keep it up! Would you like to be YouTube friends? :]

Razwan Ali

Dec 12, 2019, 8:44 pm Reply

Excellent video. So many things to be mindful of in the real estate game, especially scamsters selling you a dream!

billy billy

Dec 12, 2019, 11:02 pm Reply

You will likely have heard of Mike Winnet – this is one of his re: Property "gurus" : https://www.youtube.com/watch?v=hcLLXvb6R4k

Saskia Williams

Dec 12, 2019, 11:53 pm Reply

Love this, great video!

Nomad Project Solutions

Dec 12, 2019, 7:46 am Reply

Great video Shaf. Used to always see this advertised in my local paper and good to know that it is simply a hustle. Like always I enjoy watching your videos and learning from it 👍🏽👍🏽👍🏽

Rebecca Watt

Dec 12, 2019, 9:08 am Reply

Great video, super detailed and informative!

Antonio Rizziello

Dec 12, 2019, 9:17 am Reply

Great detailed video, unfortunately there are many fake gurus out there and not many people are talking about them… Samuel Leeds is one of the worst right now

Mark L

Dec 12, 2019, 10:40 am Reply

Brilliant

Mark Keane

Dec 12, 2019, 12:50 pm Reply

Essential viewing, we are generally poor at making good decisions based on complex information at short notice. There's also a big difference in integrity between companies that overcome objections using thin air reasoning versus those that draw on demonstrable evidence.

Matt Kimber

Dec 12, 2019, 5:24 am Reply

Great video, Shaf. Question: do loan covenants, DSCR and ISCR affect a normal BTL mortgage if you only have 1 or 2 BTL properties? In your example of the landlord having to pay the bank £7000 for every £10,000 drop in value of the house, is this true for a normal interest-only BTL mortgage?

Rajesh Malhotra

Dec 12, 2019, 2:47 pm Reply

Hi Shaf, I wish this video was around when I first found about "Property Investment" Education and Coaching I could have saved loads of wasted time and money. Still you live and learn and a very important,insightful and informative. Most Companies are making money from "Property Investment" Education rather then making money from actually "Property Investing!"

Shaf Rasul

Dec 12, 2019, 11:46 am Reply

Check out the Announcement Video about my New Property Business; https://youtu.be/L5DXj5gUmTk

The second video in this series has just been released. https://youtu.be/Rs5Gep8Kx3s

Iain Emslie

Jan 1, 2020, 8:07 am Reply

Went to the Martin Roberts one and was very similar. Seems they sell you a course but when on the course up-sell more courses and mentorships.

Ranjan Bhattacharya – Property Investment

Jan 1, 2020, 2:52 pm Reply

great video. very true observations

Kenny Telfer

Jan 1, 2020, 11:24 pm Reply

Probably the most poignant video yet Shaf, so many scammers out there, good to see you highlighting the issue and showing people how to avoid these. Keep up the good work!

harbster2

Jan 1, 2020, 10:13 am Reply

Nice video. Like all of these "guru's" in property and other industries, Samuel Leeds uses the 'contrepreneur formula'. I'm sure you've seen Mike Winnet's video. These guys basically make their money from selling courses and very little else.

I lost money with a property guru named Phil Martin 15 years ago. He sold courses and boasted that he owned over 100 properties. He is now in jail and it turns out that he owned just 5 properties.

So basically these guys make their money from the selling the courses. That's it.

Also see coffeezilla's youtube channel. He exposes fake internet guru's.

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