Professional buyer’s agent and investor Rich Harvey on investor misconceptions, negotiating like a pro, and sellers who hoard junk
What’s the biggest misconception about buyers’ agents?
Who the buyer’s agent works for is often poorly understood. Some people think buyers’ agents live in the pockets of selling agents and get kickbacks from developers, but a good buyer’s agent follows a strict code of conduct that protects the client at every stage in the buying process. ‘Exclusive’ buyers’ agents only get paid by the buyer, so there is no conflict of interest.
Being a pro at negotiating prices and contracts with real estate agents, what negotiating tactics do you think yield the best results?
I adopt a firm but friendly approach. I know my research so enter negotiations armed with the facts. Then it’s a matter of making a realistic offer, being honest, showing real intent to buy, and being persistent. There’s no point being offhand with agents; they won’t take you seriously. I ask lots of questions about the property, why it’s being sold, and discuss comparable sales with the agent. I also move quickly when the right opportunity arises. On the other hand, the biggest mistakes we see inexperienced investors making is putting in offers above market value, not analysing cash flow, and not understanding the growth and yield drivers in the local market. Many inexperienced investors also tend to believe everything the agent says.
You must have been to plenty of house inspections. We assume some had rather unique modifications. What’s the weirdest house you’ve seen?
I’ve seen some crazy places in my time. Standout was a tree house in Newport, NSW. It had a 50m inclinator to the front door, and the whole house was built from timber. That included large tree trunks for support beams. Then there was the house from hell in Waverley, NSW. The previous owner had a serious hoarding problem. They had kept everything. We couldn’t get into the front door or any bedroom without stepping over junk and rubbish. I also remember a luxury house in Sydney’s Mosman. It had everything you could imagine: a four-car garage, sauna, spa, gym, lap pool, home theatre, music room, lift, pop-up plasma TVs, exquisite bathroom. It was like a resort.
We’re guessing a lot of your Sydney customers come to you with well-formed ideas of where they will or won’t purchase, but which city areas are most people overlooking?
Yes, some clients have quite strange ideas. I think Western Sydney is the most commonly misunderstood. Investors think it won’t grow and attracts the wrong type of tenants. In fact, many areas of Western Sydney have grown at a faster rate than several blue chip inner-city suburbs that are higher priced. Coming off a lower price base makes a lot of Western Sydney’s areas more affordable for investors, and many homebuyers compete in this market so it’s often a safer market for entry and exit.
So, if you chanced upon $200,000 in cold, hard cash, yours but only for investing, where would you put it?
That would be a nice windfall! I would buy two more investment properties using around $100,000 as deposit and reno budget for each. The first would be in Western Sydney for around $350,000 to $400,000, and I’d add a granny flat. The second I would buy in Newcastle or the Hunter Region for up to $500,000. I’d look for something where I can add value, located close to local amenities, shops, schools and transport
What’s your take on an old investor debate: purchase one property in an established inner-city area with a history of performing well, or, for the same price, purchase two affordable properties in more farflung regions?
There’s no right or wrong answer here. It depends on the investor’s personal situation and goals, as well as their income, current portfolio and tax position. The inner-city property is likely to show strong capital growth, while a regional property might have a higher yield – although high growth and high yield are not mutually exclusive. If the investor is on a high income and can benefit from negative gearing, then the inner-city pad might be suitable. If the investor is on a lower income or simply wants to diversify their risk, they might be better off buying two properties at a more affordable price.