Beware of bad investments – my experience last month with a questionable investment proposal

A month ago a friend and I went to a presentation by a company called Flipping 4 Profit. The company buys properties, renovates them and then sells them quickly in order to realise a quick profit. While I have nothing against this form of investment, there were several issues with the presentation that left me feeling very uncomfortable. Some of the issues, and why they bothered me, were:

  • The presentation video they showed us spent a lot of time showing emotive images of expensive cars and big houses while asking “isn’t this the kind of lifestyle you would like to have?”, at the same time as being quite vague on the details of the scheme. Investment decisions need to be made unemotionally. By selling the scheme on a lifestyle rather than the actual scheme they neatly sidestepped having to provide the necessary information needed to make an informed decision. The highlight for me was when the presenter got her cellphone out and showed us a picture of expensive cars, which she claimed were hers as a result of investing in the scheme.
  • If someone is going to give investment advice, they are required to be FAIS registered. This helps ensure that they are qualified to give you the right advice. I am almost completely certain that the presenters were not FAIS registered and thus not qualified to give investment advice.
  • The presentation spent a lot of time showing the returns they had made on a few specific properties. I asked for an indication as to how the scheme had performed as a whole, because your actual investment return is from all the properties purchased, not just the best ones. Not only did the presenter not have this information on hand, she guaranteed me that if I invested today I would have my money back plus at least 50% within six months. Higher expected returns come together with higher risk. You cannot promise astronomical risk-free returns.
  • A large part of the presentation dealt with how you could make money by referring other people to the scheme. This concerned me, firstly, because it gave the impression that anyone could go out and sell this investment without being FAIS registered, which is not true. Secondly, the scheme needs to generate enough returns from their investment in property to deliver returns to members as well as pay commissions those who refer members. I’m not saying that the scheme is a pyramid scheme, but there are a lot of worrying signs that the investment structure is not sustainable in the long term
  • Finally, the presentation they showed us had a few spelling errors in it. While I am a bit of a grammar Nazi, incorrect spelling on a business presentation speaks volumes about the quality of the proposal and the professionalism of the presenters.

I left the presentation and told my friend to not invest in the scheme, for my reasons above. My friend isn’t familiar with investing, so he actually left the presentation thinking that it looked like a worthwhile investment before I spoke to him.

When it comes to investing your hard earned money, you need to be wary of any proposal that sounds too good to be true. There are a lot of high quality, well managed options for you to invest in. Good investments don’t over-promise on their expected returns, while so many of the investment schemes that have imploded in the past have been on the back of impossible promises made to investors.

 

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7 thoughts on “Beware of bad investments – my experience last month with a questionable investment proposal

  1. Heh, complete Ponzi scheme using new investment to pay for earlier investors returns, with the many poor souls at the end carrying the can and subsequently being reminded by the salesmen that they invested in this scheme at their own risk, and markets this markets that … blaadi blaadi blaaah.

  2. Sounds awful. Them showing off fancy cars would have turned me off immediately. While I’d love nice cars etc that is not why I’d be investing my money. Quick rich schemes generally only ever make the person selling them rich and know one else.

    Good heads up for people out there.

    – A friend of Wesley.

  3. Any scheme that relies heavily on investors introducing new people is suspect in my book. It is impossible for this cycle to sustain itself so people WILL lose money somewhere along the line. Regardless of the form in which it is presented it involves deception and fraud because not everyone will receive the money that is promised in return. A scheme that promises you’ll get rich quick with no risk is a red flag.

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  5. Under-promise and over-deliver. If an investment proposal can show you that ethic then that’s a more trustworthy source. Thanks for the article!

  6. Yeah I knew these people. Colin Caughy aka Colin Roth or Colin Caughey Roth. Side kick Jodie Oniel, Di etc who did the banner ad type websites and webinar pictures. From the Gold Coast, Australia. Leaves a trail of defunct companies, websites, lies, broken promises and people who paid exorbordant commissions who are probably stuck with properties they can’t sell at a profit, and then they’ll blame everyone else.

    Their business model is almost always the same. Colin Caughey sets up a new company website or worms his way into a real estate business in the USA. Usually a realtor or foreclosure auction company. Conducts seminars in Australia and other countries to rope in investors with cash to buy perceived relatively cheap properties in the USA and charges each a minimum $5000 commission or higher buyers fee on top of all the other buyers fees (auction or realtor fees) which is way more than a legal US realtor commission. I don’t know how this can be legal as he’s not qualified to give investment advice nor is he a realtor in the USA and never had a business visa to work there when I witnessed their antics. They go to seminars in California themselves on ‘how to do seminars’ and upsell etc.

    They buy distressed properties with investors money, (or any properties they think they can make a commission on), renovate with the clients money (again making under the table kick back commissions from the builder, which is the clients money but don’t tell them) and then try to sell it. If it sells he then wants 50% of the profit which low and behold was never discussed at purchase. This is before he even knows what the investor’s buying and selling costs were. If he doesn’t get it he will pack a tantrum like a psycho, threaten to sue, put a lien on the property, call your mother names (true story) etc.

    If it doesn’t sell at a profit it’s the investor’s problem and he uses the excuse ‘the market has changed’ or it’s everyone elses fault but his and moves on. He’s ‘moved on’ from Cleveland, Detroit, Las Vegas, Phoenix etc, currently in Florida. He’s burnt his bridges everywhere he’s been, hence ‘the market has changed’ and he can’t go back there.

    Another scheme he will promote is the joint venture, where investors can pool their money (as little as $100 each) to buy and renovate or flip a property. He’ll take 50% of any profit (plus kick backs along the way) even tho he’s put no money in. And while you’re there you’ll be sold some other network marketing internet scheme on the side (kick backs remember). In australia they were selling foreclosure bus tours in Phoenix for $15,000. (travel and hotel extra). You could go on similar tours in Phoenix for fifty bucks.

    Just google his name and scam and you’ll be provided with interesting reading. Cashrichproperties , flipping4profit, myrichesse.com … He should be stopped but will probably burn the wrong person one day anyway. Good on you for going to the seminar Nic with eyes wide open.
    http://www.ripoffreport.com/r/Colin-Roth/Fort-Myers-Florida-33907/Colin-Roth-Colin-Caughey-USA-Property-Wealth-Global-Property-Wealth-Cash-Rich-Properties-1264273
    http://www.colin-caughey-roth.com/

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