No one likes to get fooled but sometimes it can alao become very painful financially. Two of the most common scams can unfortunately turn out to be very expensive. First, be very careful when someone offers you tax effective investments or in any way suggest you play around with your tax. Second, be very careful if you attend property seminars, buying an off-the-plan property can turn out to be much more expensive than initially thought.
Poor investments or scams are annoying and can be expensive. But at least your losses are generally limited to your initial investment. Unfortunately, there are two big exceptions to this rule. Getting into various schemes that are supposed to lower your tax can backfire badly. The same goes for off-the-plan properties, often bought with a relatively small initial deposit. But if you read the contract carefully, you will find out that you promised to buy the property at the given price. You risk much more than just your initial deposit.
No one likes paying tax and tax laws are complicated. In most countries, tax laws include plenty of various exceptions and tax effective investments which can be used to lower your tax. Unfortunately, scammers have realized that they have good chances of making easy money by setting up a scheme that lowers tax. Especially in the English speaking world, the tax system is very friendly towards such tax schemes, at least the first few years. All the time, people get persuaded to join a scheme that artificially lowers their tax. Things work out fine, until the taxman takes a closer look at the scheme.
The really bad thing about these tax schemes is that they often turn out to be very expensive for the victims. First, they have invested into something that turns out to be worthless. In other words, they have thrown away their money. It does not look like a loss, the artificial tax scheme meant that the money which went into the useless investment would have been paid as tax. But once the taxman has had a look at the scheme, things typically turn nasty. The scheme is not accepted as tax effective and the investors are required to pay the outstanding tax, possible with fines and interest as well.
Since it can take years before the tax authorities take a look at a specific scheme, victims could have invested in a scheme for years. Needless to say, this often is a financial disaster for the victims. It is of course possible to challenge the decision, but that just generally makes it more expensive and prolongs the pain. Never ever get into any tax arrangements without consulting an independent tax adviser. Amazingly, some people accept advice from a salesman who makes a commission from everyone who signs up. Probably very few realize how expensive it can turn out to be.
Property seminars are not as common as they used to be but off-the-plan promotions are far from dead. In theory, off-plan is a good idea. You are getting a property in 18 months or so at today’s price. Unfortunately, virtually all off-the-plan properties are overpriced. Be especially careful at property seminars, often poor investments are disguised as bargains at such venues.
What the seller seldom tells the customers is that by signing the contract, the customer promises to buy the property at the given price. In other words, the customer may lose much more than the deposit paid at the signing of the contract. Needless to say, if the developer has found suckers who have promised to pay more than the market price for a property, he or she is unlikely to let them off the hook.
You must be very careful when signing any contracts. Never believe what a salesman, who after all will make a commission if you buy, tells you. What they tend to forget to tell you is that you have already bought the property, at the given price. But things can be even worse, often you only get two weeks to arrange the final payment once the project goes live. If you fail to secure a loan within the given time frame, you could lose your deposit. This tends to only happen if the current market price is higher than what you have promised to pay. Something that happens very seldom but you should be aware of the possibility of you losing your deposit. If the current market price is less than what you are paying, the developer generally has some understanding if you need some extra days to get your finances sorted. But the developer is unlikely to let you walk away if you have realized that the off-plan price was far too high. He or she will insist on you buying the property at the inflated price.