Finding the best investment advice is the first of many challenges to overcome before purchasing your property. But how do you know that the advice you’re paying for is worth the green? Find out how to make sound property decisions and avoid being taken for a ride.
Whether you’re a rookie property hopeful or accomplished investor, finding the right advice is crucial to the success of your investment endeavour.
If you’re a novice, you should aim to obtain a wide range of advice from professionals to help you identify which investment properties or areas are safe and lucrative.
To ensure you receive the best advice, you must take a look at what level of advice you need, what is available, where to find it and how it can benefit you.
“You need to determine whether you want your advisor to provide product advice or strategic advice, and ask yourself whether you’re capable of doing this yourself. Determine where you need assistance and where you don’t,” explains Andrew Heaven, principal at Wealth Partners Financial Solutions.
Like many things in life, searching for the right advisors takes time. This may mean months of searching through phone books and websites, and having face-to-face meetings – so be prepared.
Meet the number crunchers
When approaching the investment property market, ensure you’re armed with the most appropriate financial advice before diving in head first.
A financial advisor can provide you with a strategic roadmap of the most suitable way to meet your long-term goals and objectives. This may or may not include tax advice regarding investment properties. Many financial advisors do not charge you, but receive commission from selling you products. This can cause conflicts of interest.
All financial advisors in Australia should be licensed with the regulatory body for investment schemes, the Australian Securities & Investments Commission (ASIC). Licensed advisors’ services should be regulated and they’re also obliged by law to inform clients where their commissions – if they receive any – come from.
Any complaints or enquiries about your financial advisor should be taken up with the advisor or company first and followed up with ASIC if need be. ASIC also handles enquiries regarding investment schemes (although some schemes may not be registered under ASIC regulations).
Property investment advisors
Property investment advisors aren’t regulated and, because of the competitive property market, are more likely to receive commissions from developers or property owners. This is a commonly known fact within the industry and can often present a conflict of interest when aiming to provide clients with objective property advice.
However, the majority of property investment advisors should be independent in providing you with the right information to help you buy a suitable property. They should give you an in-depth explanation of the risks and benefits involved in buying different types of property.
Real estate agents
A real estate agent’s main aim is to sell a home for the best potential price as promptly as he or she can. Be wary when approaching real estate agents for advice about a suburb or a home – agents work primarily in the interests of the vendor (the seller) and may promote an area or property for more than it’s worth. Find out more at www.reiaustralia.com.au/consumer/choosing.asp
Separate the wheat from the chaff
Margaret Lomas, financial advisor and founder of Destiny Financial Solutions, says that less than 5% of investment property advisors are independent, meaning they don’t accept commissions.
Lomas warns buyers to be particularly wary of anyone who has simply slapped a ‘property investment advisor’ label on their door.
“Anybody can do it and that should be the first warning sign for investors,” says Lomas.
“A property investment advisor needs to make people see the very real parallels between buying a share and buying a property and how you’ve got to be just as prudent with research and your risk profile.”
Protect yourself from scammers
A good way to verify your facts and keep up with industry professionals is to educate yourself as if you were the advisor. Do this via the following:
• Free seminars are a great entry level step, although be very careful that no particular brands, companies or subscriptions are being forced upon you
• Industry magazines such as Your Investment Property and Your Mortgage provide a great stepping stone towards educating yourself because they’re independent
• The internet is also an essential tool in keeping you up to date with property trends.
Make sure you include your local government, as well as state or territory government websites Make sure that any property education facility you use is independent from companies and advisory services.
Consider what education you already have and what you still require in order to be able to make investment decisions in the future
Angelo Piazzetta, CEO of independent institution The Property School, advises investors to aim for a property course that gives you an understanding of:
- What research is available and how it can be applied
- The types of financing available and how they can be applied to you
- Your requirements from a tax perspective and how you can benefit from those
- The different types of investments (residential, commercial, building, renovating) and how they’ll have an impact on how much money you may or may not make
- Whether a set-and-forget property or complete renovation or development is best suited to your needs
The warning signs
No advisor will guarantee the kind of property investment performance you’ll get from their recommendations. If they do, you should be cautious and consider switching to another advisor.
If your advisor doesn’t want to provide information about their history in the industry or client testimonials, this should also be a warning sign.
Make sure your property investment advisor can offer properties across a vast array of areas within Australia (or your chosen location); otherwise put your boots on and start walking!
If your advisor is recommending a property scheme, check whether it’s regulated by ASIC and that there is a safe, cheap and easy exit strategy in place for investors.
If someone says they can pinpoint a ‘booming’ city or suburb that will guarantee you a successful property investment, the chances are you’ve already missed the boat – unless your own research tells you otherwise. Using Perth and South Australia’s Elizabeth as examples, Lomas warns: “If you’re reading about it, the best opportunity to invest has probably passed.”
Does it feel right?
Lomas suggests choosing your advisor as you would choose your best friend – if you’re comfortable with the advice you’re getting, this is usually a safe bet.
“I think a good property advisor should be teaching investors how to find a good property on their own and make the right decisions,” says Lomas.
Whether you are looking to buy your first home, move home, refinance, or invest in property, a mortgage broker can help. Access loans from all the major lenders, get help with paperwork – plus there is no charge for this service. Get help from a local mortgage broker