Frank and Cilla,
self-employed and in their forties, had a typical experience
with Gold Coast two-tier marketing. They sought to set up
a retirement nest egg by investing in Gold Coast property
and ended up losing more than $50,000 when they sold the property
six years later.
After a seminar organised by a Melbourne financial advisor,
they accepted a free flight to view Gold Coast units. They
were shown projections which assumed 10% per annum capital
growth and 10% per annum rental growth.
They agreed to buy a unit at the asking price of $167,500.
With costs, their outlay was $173,000.
The investment, while consistently tenanted, failed to achieve
the projected outcomes. Rental income did not rise as expected
and the value of property "declined dramatically".
According to the projections, the 2002 rental income should
have been over $310 per week. In reality, the original rent
of $175 rose only $5 in six years. The projections also under-estimated
the costs of the investment.
After enduring the cost of maintaining the investment for
six years, Frank and Cilla decided to cut their losses and
sell their unit for $125,000. After costs, they cleared about
The projections had predicted their unit would be worth $296,000
after six years.
HHPF research shows that their experience was not isolated.
One unit bought for $147,500 in 1994 sold for $100,000 five
years later; another bought for $157,500 in 1995 sold for
$110,000 four years later; while another bought for $159,900
in 1995 sold for $115,000 almost seven years later.
Before taking any action on this case, the HHPF awaits the
outcome of some current two-tier marketeering cases currently
filed by regulatory bodies and private parties.