Expert Advice with Michael Yardney. 28/11/2018
Investing in property comes with its own set of challenges.
So let’s look at four challenges faced by investors and how you can overcome them:
Currently there are more property investment advisers and buyer’s agents out there willing to “help” you than ever before.
There are bad apples in every bunch and the property industry is no different, especially as this sector is largely unregulated and you don’t really need any formal qualifications to describe yourself as an “expert.”
While there are far more professional operators than there are dodgy ones, the key of course, is to understand the difference between the two, and to recognise when something is too good to be true.
According to ASIC, Australians are collectively losing $4.3 million a month to reported investment scams. And there will be many more that go unreported.
While today’s spruikers are more sophisticated than they used to be, strategies to identify the good from the bad include checking whether they belong to professional industry associations like the Property Investment Professionals of Australia, as well as looking for independent recommendations like Google Reviews rather than fake testimonials on their website.
Also, spruikers tend to offer “advice” before they have found out all about you, your needs, your plans, your risk profile. Using a medical analogy you’d understand; they “prescribe” for you before they have even “diagnosed” you.
Luckily, there are a range of property advisers in Australia who can genuinely help you get ahead financially, by providing sound and independent advice.
While many salespeople appear to be working for you, they in fact represent the people who are paying their wages, either the property owner (if they are an estate agent) or a developer.
Because they only sell properties off their stock list, you’ll usually find they have a solution for you even before they know your needs, so they’re not really giving advice. Of course, they have their role in the property game, but at least you know who they’re working for. And it’s NOT you!
Remember…if you’re not paying their fee, you’re likely to become the product.
On the other hand, an independent adviser will tailor an investment strategy to suit your financial circumstances and will remain at arm’s length of the transaction since they are not being paid a commission to recommend any particular property to you.
Fear stops many of us from doing a lot of things. Whether it’s deciding to ask someone out on a date, changing jobs, or investing in property – the fear of what might “go wrong” is powerfully unhelpful.
Often that fear is based on the unknown and, when it comes to many things in life, there is plenty that we don’t know unless we give it a go.
Fear commonly comes from not knowing where to start or being overwhelmed and confused by the many mixed messages the media likes to offer us.
And then there are all the opinions that your friends and family have – they love to offer advice when they hear you’re interested in property. But you know what they say about opinions…they’re like belly buttons. Everyone has one, but in general they’re useless.
Strategic property investors overcome their fears by educating themselves and surrounding themselves with a proficient team.
They take a long-term perspective and ignore the negative media commentary, recognising that by following a time-tested system and owning “investment grade properties” they have little to fear as the long-term fundamentals for our property markets are solid.
One of the problems with property investment is that everyone thinks it’s easy.
This results in too many investors buying in their back yard because they know the area.
The problem is that owning a home or knowing your local neighbourhood, is very different from understanding the property investment market and how location, property selection, finance, tax, demographics and economics interplay to make a particular property outperform the averages.
This is why strategic investors look further afield to find locations that will outperform the averages because they are gentrifying or because the affluent local demographic can afford to and are willing to buy homes in that area.
These investors recognise that the right location will do the bulk of the heavy lifting in their property’s performance, but also know they need to own “investment grade properties” in those locations - properties that will outperform the averages with regards to capital growth.
Of course, any property can become an investment property. Just move the owner out, put in a tenant and it’s an investment, but that doesn’t make it “investment grade”.
Currently there is plenty of investment stock out there, but don’t confuse the two.
These properties are specifically built for the investor market and sold by marketers and developers in bulk to naïve investors, but they are not “investment grade” because they have little owner occupier appeal, they have a low land to asset ratio, they lack scarcity, they are usually bought at a premium and there is no opportunity to add value.
The bottom line:
Property investment is by no means easy. There are plenty of challenges for the inexperienced.
The key is to overcome your fears by educating yourself to become financially fluent and then surrounding yourself with a team of independent experts who can fill in any gaps and guide you towards a better financial future.
Michael Yardney is CEO of Metropole Property Strategists, which creates wealth for its clients through independent, unbiased property advice and advocacy. He is a best-selling author, one of Australia’s leading experts in wealth creation through property and writes the Property Update blog.
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Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.