Property Investment and Professional Advice

September 12, 2014 Jason Bennett 0

Residential property occupies an important place in the Australian psyche, for years there

have been televisions shows, endless print media and home shows about buying and

renovating residential property. For many of us a residential investment property is a goal,

and tails of fabulous returns abound. As a result the urban myth, you can’t lose money on

property has almost become an accepted norm.

 

The paradox of course is that there is endless media on superannuation, sharemarkets and

investing, for which many of us believe it is complex and you can lose money.

The fact is that you can lose real or perceived money in any investment class be it property

or shares or any other, raises an interesting question.

 

Why do Australia’s make some of the largest investment decisions of their life time,

based on their gut instinct, when many of us seek assistance with our share investment,

superannuation and tax?

 

The answer is we are not sure, but they should, in 2013 the Australian Taxation Office

released figures that showed that 70% of those who buy investment properties lose money.

While a proportion of this is a function of negative gearing, a significant amount is capital

losses.

 

Part of the problem is that at little as 5% of the properties on the market are investment

grade properties. Add to this poor market intelligence, contracts that are stacked in the

favour of developers and sellers, agents who give the appearance of having all parties best

interests at heart but are renumerated by the seller and the nature of property investment

itself, and poorly advised and prepared investors could be staring at a financial disaster.

Residential property can provide strong long term returns, if the right the asset is selected,

in a good location and importantly owned in the right structure with the appropriate level of

gearing.

 

To achieve strong outcomes residential property investors should consider engaging an

investor advocate who works for you in concert with your financial advisor.

Investor advocates are specialists in searching, evaluating and negotiating the purchase of

an investment property on behalf of the buyer. They are not real estate agents and they do

not exclusively list or act as a developers project marketer.

 

The key difference between investor advocate and a traditional property agent is who they

represent. Investor Advocates works for the buyer in identifying property through their

specifically designed campaigns, whereas the traditional agent works for the vendor to sell

their property to anyone, no matter what their investment objectives are.

An important question to ask the agent is whether they are truly “exclusive” or “independent”.

Some investment agents are aligned with developers and will only push stock that they

will be paid the most commission on. Far too often we have seen an investor purchase

an investment property from the “spruiker” off the plan that has ended up being valued at

20-30% under what they had agreed to pay for it at the time of purchase, a result that is

not market related and purely as a result of inflated commissions or worse built into the

purchase price. Having an advisor working with you that knows the traps and can also assist

in negotiating terms that protect the purchaser. The price is only one part of the equation.

What other commercial terms are in the contract?

The investor advocate will provide its clients with knowledge they need to make an informed

decision about the value of an investment property without all of the sales “hype” often

generated by retail sales agents that are aligned with particular properties or projects.

Your investor advocate will be able to deliver the following benefits to you and your financial

management team;

 

1. Use a professional negotiator to obtain the best deal possible the works with your

financial plan.

2. Have an independent, professional investment agent on your side.

3. Help investors build their property portfolio faster by buying in the growth areas.

4. Source the right type of property in locations across Australia with good prospects for

capital growth .

5. Provide investors with additional confidence and due diligence information.

6. Leverage off the property advisors network to gain access to a wider choice of

properties (generally these are not even advertised)

7. Leverage your time – instead of searching the newspapers and internet every

weekend, get someone else to do the hard work short listing suitable properties.

8. Eliminate the stress and frustration of being shown inappropriate and unsuitable

properties by agents that don’t listen to the client’s needs.