Avoiding Property Investment Traps – Off-the-Plan Risks, Market Timing & Spotting Property Spruikers (Ep. 303)

Show Notes – Property Investment Traps

Dave hosts this episode with an insightful listener question from Sarah — and it opens up a wide-ranging conversation on property investment traps, off-the-plan risks, SMSF strategies, and how to identify spruikers before they lead you down the wrong path.

Sarah writes:

“Melbourne will need to turn around at some point after underperforming. With this, there’s been an increase (or at least it seems like it) in marketing/spruiking around purchasing off-the-plan luxury apartments targeting down-sizer owner occupiers. I know someone who has bought into the Jam Factory complex with an SMSF after being lured in by the prospect of huge gains over the next decade. The same is happening in Brisbane where people are being told there’s still plenty of growth ahead of the Olympics. Should buyers be wary or will the eventual turnaround see apartments outperform? OTP or established? Or would you stick to houses instead? How to identify a spruiker over a genuine buyer’s agent, and how we identify the start of FOMO.”

She also asks, “When is outer suburban a better investment than inner city or fringe?”

Cate opens the episode with a confronting story shared by her Uber driver, who was encouraged by a broker to invest his SMSF into a commercially-zoned, off-the-plan apartment. With poor advice and a lack of independent oversight, he now faces serious financial and lending constraints — a cautionary example of how easily property investment traps can unfold.

Dave highlights the importance of recognising when advice isn’t independent, particularly when all parties involved are working from the same playbook. This lack of true representation is a risk buyers can’t afford to ignore.

The Trio explore the question of Melbourne’s recovery, referencing their recent episode on mean reversion and acknowledging the early signs of a turnaround — but also the need for strategic, not reactive, investing.

Cate echoes Sarah’s observation that spruiking and marketing noise has increased, especially in high-density developments. She explains how developer incentives and low buyer sentiment have combined to create ideal conditions for aggressive off-the-plan sales activity.

The Jam Factory development becomes a key case study in the discussion, with Cate and Dave unpacking the challenges of buying in high-density locations — from low scarcity to rental weakness and resale value issues.

Mike expands on the valuation risks in large complexes and how multiple similar sales in the same building can drag values down, affecting not just your property’s worth but also your borrowing power.

The team also highlight the difficulty in accessing accurate sales data on new developments. Without clear visibility into rebates, true sale prices, or previous values, buyers are at a major disadvantage — one of the most persistent and dangerous property investment traps.

On the topic of apartments, Cate explains the key differences between high-rise and boutique offerings, and outlines the selection criteria she uses to identify apartments with strong potential. From orientation and outdoor space to owners corporation history, due diligence is essential.

The Trio share the critical questions investors should ask to determine whether they’re dealing with a spruiker or a genuine buyer’s advocate. From who’s paying them, to whether they insist on using their own network of professionals, it’s about asking the right questions early — before you’re locked in.

When it comes to FOMO, the Trio walk through the signs of a warming market and how buyers can separate real momentum from artificial urgency.

Finally, the team tackle Sarah’s question on outer suburban versus inner city and fringe markets. There’s no one-size-fits-all answer — your personal goals, budget, timeframe and cash flow all matter. A qualified property planner or independent buyer’s agent can help guide that decision with clarity.

Thank you to Sarah for such a thoughtful and wide-ranging set of questions — this episode is packed with insight for any investor looking to avoid property investment traps and make more informed decisions.