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From today's Sunday Star Times:
"YOU CAN focus on what you are good at, which is finding property deals, and we can focus on what we are good at, which is moving property deals, and we have a lovely marriage together," Richmastery founder Phil Jones told a gathering of investors in Auckland late last year.
Jones, whose Richmastery business claims to have a database of 60,000 property investors,was selling licences priced at $5000 (bronze), $25,000 (gold) and $50,000 (platinum) for a new venture, Blue Peak Wealth Management.
Licensees were to source properties for onsale by Blue Peak, in return for a finder's fee of $3000 and a share of the property buyer's debt.
After a little over seven months, the marriage has turned sour. Licence holders contacted by the Star-Times say Blue Peak has sold none of the properties they found, and the promise made by Jones that they would make "insane amounts of money" has yet to be fulfilled.
In a DVD promoting Blue Peak, Jones told licensees: "We are going to show you how you can work half the hours you work, and double your income ... We are going to show you how to create wealth out of thin air."
Those profits could add up to more than $3 million over the five-year term of the most expensive licences, Jones claimed.
Sources say Blue Peak received more than $1m from the sale of licences. That money does not appear to have been a good investment for some licensees.
Six have told the Sunday Star-Times they were yet to make a bean, despite having delivered properties to Blue Peak to sell.
Licensee Dan Heke, who "downgraded" his licence from gold to bronze as a way of cutting his losses, although he got no refund of any of the $15,000 he had already paid, said: "We have been in this business for over six months and nothing has come of any of the properties we have presented.
"The only reason I bought into the franchise was because I had the understanding that there was a database of buyers ready to buy, but from the start there have been no buyers," he claims.
Another licensee reported presenting eligible properties within weeks of the Blue Peak launch. He said no buyers were found and he had given up the cash he spent on his licence.
"I can't find the time to spend looking for properties only to find they can't sell them," he said. "I'd very much like my money back, but I don't think they will do that somehow."
His principal complaint: "He [Jones] promised us he would do a large marketing campaign, which really has failed to surface."
Still another licensee, who has threatened legal action, said: "I presented them with three deals. All of them fell over.
"We were led to believe that all we had to do was find the deals and there would be buyers to take them on, but it didn't work out that way at all."
Despite the catalogue of complaints, Blue Peak flatly denies any problem. In a statement to the Star-Times from director Sean Levy, the company said: "The five-year programme has only been operating for six months and already Blue Peak is delivering real results with an operational system that has completed numerous transactions around New Zealand for both customers and licensees."
Allegations from licensees were nonsense, said Levy. "The first phase of the marketing plan has also been rolled out with an investment of hundreds of thousands of dollars including print and radio advertising, ongoing upgrades to the website www.bluepeak.co.nz, emails promoting deals sent to a large customer base on a weekly basis, first home-buyer evenings and consultations with potential clients being held around the country.
"It is disappointing to us that a small number of individuals have chosen to breach their contracts with us by airing their concerns through the media as opposed to activating the proper channels.
"We are at a loss to understand what they are basing their inaccurate claims on, but we do appreciate that with the downturn in the New Zealand economy it is possible that some licence holders have overcommitted themselves and might now be struggling to keep up with their licence fee payments."
Selling the licences to property finders was part of a bigger plan for Jones.
Instead of Richmastery finding properties to sell to its database of property investors, a method Jones saw as limiting the number of deals that could be done, he would get others to pay him to find properties for a new company, Blue Peak, which would then market them for sale.
Better still, Blue Peak would find potential buyers, get them pre-approved for finance, and then the licensees would be given instructions to go out shopping for homes for them, a little like being sent off to the supermarket with someone else's wallet to shop on their behalf.
"We are going to become the number one delivery system for property in New Zealand," Jones told potential licensees, many of whom had previously bought into Richmastery schemes.
Under the Blue Peak system, licensees would source properties on the cheap from owners struggling to pay the mortgage and desperate for a sale. These would then be on-sold by Blue Peak at a profit.
The licensees would get a $3000 finder's fee for each property, but what was more tantalising was the chance for gold and platinum licence-holders to make passive income, dubbed "loan book". This was to be created by lending most of that profit back to the buyer as a "deposit", with banks then lending them the rest.
That ready-made deposit, Jones told licence-buyers, would create a market allowing those with little or no savings to buy homes. Jones said potential buyers would be told: "If we give you the deposit and the bank gives you the other 90% or 95%, you don't need any money."
However, after two years the deposit would convert into a principal and interest loan to be paid back at 12% over the next eight years, creating passive income for licence holders.
Jones told potential buyers: "Have we done our homework with the real estate agents and with the finance groups? Yes, we have. I'm comfortable with what we are doing because we have been very thorough before we have got to this point."
But licensees say finance has not been forthcoming.
Tracey Munns of Connect Mortgages, the mortgage broker who was supposed to find finance for Blue Peak deals, was unwilling and unable to do so. Another broker taken on by Blue Peak fared no better, say licensees.
Munns would not comment, but mortgage broker Sue Tierney said banks were cautious about lending into deals that inflated transaction values.
An investigation by the Star-Times in May revealed one Christchurch house being marketed by Blue Peak for $390,000 was also being marketed by real estate agency Simes for $45,000 less, with Simes insisting its was the true market value.
Last week another Christchurch property Blue Peak was marketing for $250,000 on its website was also listed for $239,111 by Ray White.
Tierney said borrowed deposits meant the type of deal Jones promised to licence holders would be seen by the banks as near 100% finance.
ANZ told the Star-Times the type of loans involved in the Blue Peak structure were "extremely unlikely to fall within our current lending criteria".
One licensee said it was virtually impossible to get 100% finance. "You have to have a university degree, earn $100,000, living in an urban area with an impeccable credit history."
Licensee Ifa Humm, who says she just wants Jones to refund her $45,000, agreed: "They created something that could never work."
Levy strenuously denies that finance is a problem. "Since Blue Peak's inception it has generated millions and millions of dollars of loan books with customers."
The Star-Times asked Jones to put us in touch with licensees who had seen their deals go through, but he said that was not possible for reasons of confidentiality. Those claims of success may end up being tested by regulators, as several licensees contacted by the Star-Times said they were considering complaints to the Commerce Commission.
Those who are demanding their money back include former business partners David Whitburn and Ammon Acarapi of Fuzo, who said they had cancelled their Blue Peak agreement because Blue Peak failed to live up to its side of the bargain. The pair are in dispute over unrelated business matters with Jones.
Several of those we spoke to are talking about mobilising licensees into joint action.
Others have just given their money up as lost and are using the lessons they learned from Blue Peak to go into business for themselves, although their contracts with Blue Peak limit them to trading no more than one property a month. Heke said: "I'm still looking for properties, but not for Blue Peak. I'm selling them myself."
BLUE PEAK DEALS
Here's how a typical deal would work A licensee finds a home they can buy for $275,000, perhaps from a family who have run into financial difficulties, but which a valuer is willing to rate as worth $320,000. An offer is made, conditional on Blue Peak being able to on-sell the property for $320,000 to a buyer without a deposit. Of the $45,000 price difference, $35,000 would be "given" back to the buyer as a deposit, initially as a zero interest loan with no repayments for two years, after which it becomes an eight-year principal and interest loan at 12%.
In effect, Blue Peak is delaying taking some of the profits from the purchase and sale in order to create a deposit. The remaining $10,000 would be divided between the licensee, Blue Peak, and costs. The buyer funds the rest of the purchase price, $275,000, with a loan sourced by a mortgage broker organised by Blue Peak.
When the "deposit" turns into a loan, the interest payments generate income for the licensee.
Jones, whose Richmastery business claims to have a database of 60,000 property investors,was selling licences priced at $5000 (bronze), $25,000 (gold) and $50,000 (platinum) for a new venture, Blue Peak Wealth Management.
Licensees were to source properties for onsale by Blue Peak, in return for a finder's fee of $3000 and a share of the property buyer's debt.
After a little over seven months, the marriage has turned sour. Licence holders contacted by the Star-Times say Blue Peak has sold none of the properties they found, and the promise made by Jones that they would make "insane amounts of money" has yet to be fulfilled.
In a DVD promoting Blue Peak, Jones told licensees: "We are going to show you how you can work half the hours you work, and double your income ... We are going to show you how to create wealth out of thin air."
Those profits could add up to more than $3 million over the five-year term of the most expensive licences, Jones claimed.
Sources say Blue Peak received more than $1m from the sale of licences. That money does not appear to have been a good investment for some licensees.
Six have told the Sunday Star-Times they were yet to make a bean, despite having delivered properties to Blue Peak to sell.
Licensee Dan Heke, who "downgraded" his licence from gold to bronze as a way of cutting his losses, although he got no refund of any of the $15,000 he had already paid, said: "We have been in this business for over six months and nothing has come of any of the properties we have presented.
"The only reason I bought into the franchise was because I had the understanding that there was a database of buyers ready to buy, but from the start there have been no buyers," he claims.
Another licensee reported presenting eligible properties within weeks of the Blue Peak launch. He said no buyers were found and he had given up the cash he spent on his licence.
"I can't find the time to spend looking for properties only to find they can't sell them," he said. "I'd very much like my money back, but I don't think they will do that somehow."
His principal complaint: "He [Jones] promised us he would do a large marketing campaign, which really has failed to surface."
Still another licensee, who has threatened legal action, said: "I presented them with three deals. All of them fell over.
"We were led to believe that all we had to do was find the deals and there would be buyers to take them on, but it didn't work out that way at all."
Despite the catalogue of complaints, Blue Peak flatly denies any problem. In a statement to the Star-Times from director Sean Levy, the company said: "The five-year programme has only been operating for six months and already Blue Peak is delivering real results with an operational system that has completed numerous transactions around New Zealand for both customers and licensees."
Allegations from licensees were nonsense, said Levy. "The first phase of the marketing plan has also been rolled out with an investment of hundreds of thousands of dollars including print and radio advertising, ongoing upgrades to the website www.bluepeak.co.nz, emails promoting deals sent to a large customer base on a weekly basis, first home-buyer evenings and consultations with potential clients being held around the country.
"It is disappointing to us that a small number of individuals have chosen to breach their contracts with us by airing their concerns through the media as opposed to activating the proper channels.
"We are at a loss to understand what they are basing their inaccurate claims on, but we do appreciate that with the downturn in the New Zealand economy it is possible that some licence holders have overcommitted themselves and might now be struggling to keep up with their licence fee payments."
Selling the licences to property finders was part of a bigger plan for Jones.
Instead of Richmastery finding properties to sell to its database of property investors, a method Jones saw as limiting the number of deals that could be done, he would get others to pay him to find properties for a new company, Blue Peak, which would then market them for sale.
Better still, Blue Peak would find potential buyers, get them pre-approved for finance, and then the licensees would be given instructions to go out shopping for homes for them, a little like being sent off to the supermarket with someone else's wallet to shop on their behalf.
"We are going to become the number one delivery system for property in New Zealand," Jones told potential licensees, many of whom had previously bought into Richmastery schemes.
Under the Blue Peak system, licensees would source properties on the cheap from owners struggling to pay the mortgage and desperate for a sale. These would then be on-sold by Blue Peak at a profit.
The licensees would get a $3000 finder's fee for each property, but what was more tantalising was the chance for gold and platinum licence-holders to make passive income, dubbed "loan book". This was to be created by lending most of that profit back to the buyer as a "deposit", with banks then lending them the rest.
That ready-made deposit, Jones told licence-buyers, would create a market allowing those with little or no savings to buy homes. Jones said potential buyers would be told: "If we give you the deposit and the bank gives you the other 90% or 95%, you don't need any money."
However, after two years the deposit would convert into a principal and interest loan to be paid back at 12% over the next eight years, creating passive income for licence holders.
Jones told potential buyers: "Have we done our homework with the real estate agents and with the finance groups? Yes, we have. I'm comfortable with what we are doing because we have been very thorough before we have got to this point."
But licensees say finance has not been forthcoming.
Tracey Munns of Connect Mortgages, the mortgage broker who was supposed to find finance for Blue Peak deals, was unwilling and unable to do so. Another broker taken on by Blue Peak fared no better, say licensees.
Munns would not comment, but mortgage broker Sue Tierney said banks were cautious about lending into deals that inflated transaction values.
An investigation by the Star-Times in May revealed one Christchurch house being marketed by Blue Peak for $390,000 was also being marketed by real estate agency Simes for $45,000 less, with Simes insisting its was the true market value.
Last week another Christchurch property Blue Peak was marketing for $250,000 on its website was also listed for $239,111 by Ray White.
Tierney said borrowed deposits meant the type of deal Jones promised to licence holders would be seen by the banks as near 100% finance.
ANZ told the Star-Times the type of loans involved in the Blue Peak structure were "extremely unlikely to fall within our current lending criteria".
One licensee said it was virtually impossible to get 100% finance. "You have to have a university degree, earn $100,000, living in an urban area with an impeccable credit history."
Licensee Ifa Humm, who says she just wants Jones to refund her $45,000, agreed: "They created something that could never work."
Levy strenuously denies that finance is a problem. "Since Blue Peak's inception it has generated millions and millions of dollars of loan books with customers."
The Star-Times asked Jones to put us in touch with licensees who had seen their deals go through, but he said that was not possible for reasons of confidentiality. Those claims of success may end up being tested by regulators, as several licensees contacted by the Star-Times said they were considering complaints to the Commerce Commission.
Those who are demanding their money back include former business partners David Whitburn and Ammon Acarapi of Fuzo, who said they had cancelled their Blue Peak agreement because Blue Peak failed to live up to its side of the bargain. The pair are in dispute over unrelated business matters with Jones.
Several of those we spoke to are talking about mobilising licensees into joint action.
Others have just given their money up as lost and are using the lessons they learned from Blue Peak to go into business for themselves, although their contracts with Blue Peak limit them to trading no more than one property a month. Heke said: "I'm still looking for properties, but not for Blue Peak. I'm selling them myself."
BLUE PEAK DEALS
Here's how a typical deal would work A licensee finds a home they can buy for $275,000, perhaps from a family who have run into financial difficulties, but which a valuer is willing to rate as worth $320,000. An offer is made, conditional on Blue Peak being able to on-sell the property for $320,000 to a buyer without a deposit. Of the $45,000 price difference, $35,000 would be "given" back to the buyer as a deposit, initially as a zero interest loan with no repayments for two years, after which it becomes an eight-year principal and interest loan at 12%.
In effect, Blue Peak is delaying taking some of the profits from the purchase and sale in order to create a deposit. The remaining $10,000 would be divided between the licensee, Blue Peak, and costs. The buyer funds the rest of the purchase price, $275,000, with a loan sourced by a mortgage broker organised by Blue Peak.
When the "deposit" turns into a loan, the interest payments generate income for the licensee.
Author: Rob Stock.
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