Last week the Financial Conduct Authority (FCA) highlighted its efforts to protect people from the dubious returns offered by ‘high risk’ investment funds.

nigel lewis
LandlordZONE editor Nigel Lewis

The FCA wants to address harm to consumers from investing in inappropriate high-risk investments because many consumers don’t understand the risks involved, which can lead to “significant and unexpected losses”.

But sadly its remit does not include property investment, unless it is via a regulated fund, and even then most of its efforts are about how they are marketed.

A significant number of dodgy property gurus who preach how to make a living from, or recommend investing in, high-risk investments have rushed into this regulatory void, muddying the reputation of the overall sector and its above-board operators.

- Advertisement -

And ‘preach’ is the right word. Level-headed and usually sceptical people who attend these courses, often in church-like venues led by a fire-and-brimstone style gurus, are persuaded to part with large sums on the spot.

Fees range from a few hundred pounds to the many thousands for courses that often counsel attendees to enter risky rent-to-rent contracts or put significant sums into perilous buy-to-let properties or developments.

The reason that the FCA has not been enabled to regulate investments like this, even though some are as precarious for investors as the ‘high-risk funds’ the FCA covers, is that there has yet to be a high-profile scandal.

When one of these ‘get rich quick’ schemes does blow up horribly, regulators such as the FCA and the government cannot say they weren’t warned.

In the absence of regulation, Google searches are the only thing preventing people from losing life-changing amounts of money, where they will hopefully discover the handful of Facebook pages, forums such as Property Tribes and the Danny Butcher Foundation.

vanessa tribes

“Vanessa Warwick, co-founder of Property Tribes (left) says: “In the world of ‘get rich quick’ it only works if someone ‘gets poor quick’, namely the  mentees paying for a ticket to see a unicorn.

“The interesting thing is that it is easier to fool someone than to convince them that they have been fooled.

“They believe the Instagram lifestyle of flashy cars and homes and never question anything the guru claims, such is their desire to believe that there is a pot of gold at the end of the rainbow.

“Many of these people end up financially worse off and, as the sector is unregulated, there are no real routes of redress or they cannot afford to take legal action. Lives have been ruined so I applaud Landlord Zone for highlighting these issues and risks.”

As the Danny Butcher Foundation points out, this used to be a cottage industry but it is rapidly expanding into a multi-million pound sector, helped by historic low interest rates which are persuading many people to look for new places to grow their savings.

LandlordZONE is aware of at least one training academy that has dozens of risky property investments under way underpinned by investor cash which, should it all go wrong, will affect hundreds of people.

The troubling fact is that, as is always the case, the government’s gaze will only fix on this problem once millions of pounds have been lost.

Read more about the Danny Butcher Foundation.

9 COMMENTS

  1. Of course people can be fooled by the get rich quick via property rentals! So many people think ALL landlords are rich, and ALL the rent is income. This is certainly not the case.

    It is this erroneous view of landlords’ incomes that is leading to all the landlord bashing we see in legislation and the media.

    • Totally agree, if people want a true reflection of the business, try the Nightmare tenants programme.

      I feel for people trying to think they pay these guys a load of cash and it means never having to work again.

      • Thank you!

        Just remember that if you try and talk about the reality of property investment , and all the pitfalls that can trip you up, in guru circles, you’ll be cited a “neg head”, “hater”, or “nay-sayer”!

        Very few of these property educators even mention the word “tenant” – which just shows how misleading their advice is. The tenant is your customer – without them and providing them with a safe , compliant, and maintained home – you don’t actually have a business.

        These customers do not always behave in the manner that you would hope – so you must plan for rent arrears, voids, property damage, repairs, maintenance, & compliance costs.

        With the new EIRC regulation, for example, I’ve had to had 5 property’s electrics up-graded at circa £600.00 plus VAT per property.

        The costs associated with running a property are significant, but you won’t hear that from the property educators.

        It’s solely about how much money is appearing in your bank account each month and your tenant is the invisible person who keeps paying month after month and you never hear a peep out of them!

  2. Thanks for posting this Nigel.

    The recent bankruptcy of property guru Glenn Armstrong for over £5million should send alarm bells ringing. Most of his creditors entered into his marketing funnel for training, but ended up lending him money on property developments that never came to fruition:

    https://www.propertytribes.com/glenn-armstrong-made-bankrupt-t-127651187.html

    The FCA were warned about Mr. Armstrong and I believe he was interviewed, but they did nothing.

    It’s a pretty sorry state of affairs that it rests on concerned citizens to highlight the risks of these training courses and lending gurus’ money. As we know, such individuals often receive on-line abuse, legal threats, and harassment campaigns against them to try and shut them down and discredit them.

    However, the truth always prevails, and it will be no different in the “wealth educator” sector. The wheels of justice turn very slowly, but turn they do.

    The more people that speak out and create substantiated community due diligence resources, the more impotent the wealth educator marketing will become. That this issue is now reaching mainstream media is also a very promising development, as the more awareness created, in the absence of any formal regulation, the more people will be able to understand the risks and make informed choices.

    Keep up the good work all people who are serving the community by creating these substantiated resources and facilitating commentary that is most definitely in the public interest! You ARE making a positive difference.

    I suspect that it could be an “Al Capone” type situation that brings down a major guru rather than a regulator – ie not directly relating to their training activities, but perhaps something along the lines of indulging in tax evasion or perhaps taking a Bounce Back loan fraudulently.

    Many of them put out such misleading and inaccurate commentary – often around regulated topics like tax and pensions – that they literally put a target on themselves.

    Like Al Capone, their day will come.

    • Great comment, and hopefully the sooner the better.

      Too many people enter the business and end up becoming so called ‘rogue landlords’ because they cannot afford to keep up with this ever regulating and media bashing business.

      I highly doubt they teach that on the course.

  3. Can they get rid of that awful programme ‘homes under the hammer’ whilst they are at it? Its another programme that defies reality with its absurd claims of how easy the property business is. If people want a true reflection of the business, they should try Nightmare tenants.

  4. It is a fact that most people are very nasty when it comes to returning any monies lent to them personally.

    If it means they could be repaying such personal debts for decades they just WON’T bother.

    They will leave the personal lender to cover the debt repayment.

    So to avoid this situation no monies should be lent personally to anyone ESPECIALLY GRQ Gurus.

    All banks etc to lend to these Gurus.

    Banks will carry out proper DD.
    If they AREN’T prepared to lend then that is all the DD required.

    NEVER lend and monies to a GRQ Guru that you AREN’T prepared to lose.

    Anyone thinking of investing in the property world should join Property Tribes and do extensive reading as part of thorough DD.

    The site will save you being ripped off.

    BTW there are NO unicorns just in case idiot newbies who believe in GRQ Gurus aren’t aware.

LEAVE A REPLY

Please enter your comment!
Please enter your name here