Expert Advice with Michael Yardney. 28/12/2016Who do you ask for property investment advice?
A recent survey by the Property Investment Professionals of Australia (P.I.P.A) revealed the many and varied sources investors consult for advice, but since most property investors fail to achieve the financial freedom they deserve, and with less than 8% ever owning more than 2 properties, a better question to ask would be…
Who should you ask for property investment advice?
So let’s look at who you could turn to:
1. No One – many beginning investors think they understand real estate because they’ve lived in or rented a home or an apartment. That’s a big mistake and probably one of the reasons around fifty percent of first time investors sell up within five years.
2. Friends or family – I understand why you’d do this, but the question to ask is: are they financial experts? How many millionaires do you have in your family? If not, don’t ask them because often their advice will be to avoid property investment because of the “risk.”
3. A real estate agent - Remember agents work for the vendor to help them achieve the best price, and they’re unlikely to tell you about the other great properties for sale in the area by other agents.
4. A mortgage broker – While it’s important to have an investment savvy mortgage broker on your side helping you through the finance maze, most don't understand the property market well enough to advise on what is an “investment grade” property.
5. An accountant - your accountant should advise you on tax matters and structuring, but most don't have the intimate knowledge of the property market required to give investment advice.
6. Financial planners – While financial planners are licensed to sell financial products, most are not able to advise on real estate. Not only because they lack a sound understanding of property, but the company they work for doesn’t allow them to. And those who do recommend property usually have a biased view as they make commissions based on the investments they sell from their “stock list.”
6. A property marketer – while these salespeople may seem to be on your side, they're really selling “product” for a property developer who is most likely going to make the biggest profit out of the deal.
7. Investment seminars and workshops – Ask yourself: Is the person conducting the event an investment expert in their field? How long have they been financially secure or do they make their money teaching others?
8. A property mentor – There seems to be an abundance of property mentors around - some who give great guidance, while others are really property sellers or marketers in disguise.
Don’t get me wrong…I believe it's important to have mentors. They see your blind spots, give you guidance and support and expand the way you think. Just be careful who you choose and ensure they have achieved the results you want to achieve.
8. A buyer’s agent - These can be a great help in selecting the right property but most are just “order takers” – they don’t devise a plan that takes into account your families future needs and your risk profile. That’s why you need…
9. A property adviser or strategist. In my mind it is critical to have a trusted advisor when making property investment decisions. It’s just too hard to do it on your own or by trial and error. There’s a huge learning fee involved – of time, money, effort and heartache.
I find it interesting that while most wealthy people have, and are prepared to pay for, trusted advisors in many areas of their lives, the average person has no advisers or they get their advice from salespeople who they perceive as advisers but are far from independent. On the other hand, following the teachings and proven systems of those who’ve already achieved what you want to achieve and who’ve retained their wealth through a number of property cycles, while not guaranteeing your success, makes it much, much more likely.
How can you tell that you’re dealing with a trusted advisor?
A trusted advisor tailors their recommendations to your personal circumstances and they warn you of the risks as well as the rewards. Their advice is not biased by any property, products or services to be sold.
So one of the first questions I’d ask them is “How are you getting paid?” This will reveal a lot. If they are offering free advice, or they are being paid by a third party (such as a developer or property vendor) then their advice cannot be independent.
Your adviser should be qualified and a member of a recognised organisation such as the P.I.P.A and be an investor themselves. They should have a thorough understanding of not only property, but also finance, economics and the taxation system as far as it relates to real estate investment
Similarly, your advisor should have no properties for sale, should have a number of investment options available depending upon your circumstances, should not make any recommendations at the first meeting and should not create a “sense of urgency.”
The bottom line.
There is only so much you can learn from the financial media, books and seminars.
While you can gain knowledge from the Internet, you can’t gain experience. That takes years to acquire and comes at a cost
It’s just too difficult for beginners and even for more experienced investors to gain perspective into what's happening in today’s fast moving markets. That takes time, money and comes at a cost.
That's why I suggest you leverage off the experience of a professional property adviser – a property strategist – one who is independent and unbiased. In my mind sound professional advice is never expensive, on the other hand most investors pay huge “learning fee” to the market by buying the wrong property, in the wrong location, at the wrong price.
Michael Yardney is a director 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.