Who do you ask for property advice?
With so many mixed messages and vested interests, who can you really trust?
Metrpole’s recent Property Investor Consumer Sentiment Survey revealed the many and varied sources that property 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 be asking for advice?
This detailed article is designed to help you cut through the clutter:
- WHO COULD YOU ASK FOR PROPERTY INVESTMENT ADVICE?
- WHAT DO PROPERTY STRATEGISTS ACTUALLY DO?
- HERE’S A LIST OF SOME OF THE THINGS A GOOD PROPERTY ADVISOR CAN (SHOULD) DO:
- HERE ARE SOME THINGS A PROPERTY ADVISOR CAN’T DO:
- WHAT IS THE DIFFERENCE BETWEEN A PROPERTY STRATEGIST AND A BUYER’S AGENT?
- HOW DO YOU MAKE YOUR MONEY & DO YOU DISCLOSE ALL COMMISSIONS TO YOUR CLIENTS?
- HOW DO I KNOW IF I’M GETTING RIPPED OFF?
- PUT SIMPLY IF THE ADVICE IS FREE THEN YOU ARE THE PRODUCT!
- IF I ALREADY HAVE A FINANCIAL PLANNER, DO I STILL NEED A PROPERTY ADVISOR?
- HOW MUCH DOES A PROJECT MARKETER (SPRUIKER) MAKE WHEN THEY SELL A BUYER ONE OF THEIR ‘RECOMMENDED’ PROPERTIES?
- THE BOTTOM LINE…
WHO COULD YOU ASK FOR PROPERTY INVESTMENT ADVICE?
Here are the people you could turn to:
1. No One â€” 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.
While they may know their local neighbourhood, that’s very different to understanding the property market.
2. Friends or family â€” I understand people may 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 â€” 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 â€” 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 â€” 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 â€” 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. Those who do recommend property usually have a biased view as they make commissions based on the investments they sell from their “stock list.”
7. A property marketer â€” 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.
8. Investment seminars and workshops â€” 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?
9. A property mentor â€” There seems to be an abundance of property mentors around â€” some who give great guidance, while others are really property sellers or marketers in disguise.
Let’s make it clear: 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.
10. A buyer’s agent â€” These can be a great help in selecting the right property but most are just “order takers” â€” they don’t devise a plan that takes into account your family’s future needs and your risk profile.
However, when you look at this list you can now see why you need… an independent, unbiased 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 â€” 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.
WHAT DO PROPERTY STRATEGISTS ACTUALLY DO?
I see my role as a property advisor as helping our clients grow, protect and pass on their wealth using property as a vehicle.
While people come to the team at Metropole for property advice, in fact they’re really coming for something else.
Some are looking for financial freedom; others for more choices in life like working because they want to, not because they have to; and yet others want to leave a legacy for their family or the community.
So, property is really just the vehicle they’re keen on using to achieving their end goals.
While most property advisors come from a real estate background, the property strategists at Metropolecome from a wealth, financial planning or banking background, but have a good understanding of property and are successful investors themselves.
You see…at Metropole our property strategists’ job is not to sell clients properties, but to help them safely increase their wealth over the long term.
Many years ago, when I first saw a gap in the market for sound strategic advice, I set about providing my services as a property strategist.
I was the first one I knew of â€” today many people call themselves property “advisors” or “strategists”, yet quite a few are thinly disguised salespeople, or are not really qualified to give in depth advice.
So, let’s look at what a good strategist can and can’t do…
HERE’S A LIST OF SOME OF THE THINGS A GOOD PROPERTY ADVISOR CAN (SHOULD) DO:
1. A good advisor will first start by getting to know their clients’ hopes and fears and then be future-focussed to help them achieve their long term financial goals.
2. With so many mixed messages about property investing out there (many coming from parties with vested interests), a good property advisor will help remove his client’s anxiety by simplifying the complex.
They will provide clarity around the complicated world of wealth creation which involves much more than just property â€” but includes finance, tax, economics and the law. They will advise their clients about the risks as well as the rewards of property investment.
3. While most buyers’ agents or property sales people are transactional and think of the current “sale” or purchase, a professional property advisor will aim to develop a long-term relationship and help their clients understand the next two or three steps even before taking the first step.
4. Many clients come to a real estate advisor looking for the next big thing â€” some are looking for a shortcut, or the next hotspot, or a way to get rich quickly.
Instead, a qualified property strategist will stop their clients speculating by recommending proven strategies that have always worked.
5. A good independent advisor will not have any properties for sale, but will have a list of potential options and refer their clients to a buyer’s agent who is part of their team to find the best opportunity in the market to suit their client’s budget, plans and risk profile.
6. A strategic advisor will never put any pressure on their client to make an investment decision, but their knowledge, research and experience will help their clients select an investment property that is the highest and best use of their funds, and one that will work hard for them over the long term.
7. A wise property strategist will help their clients avoid the big mistakes made by the average investor and will earn their fees simply by helping their clients avoid the devastating errors made by many investors such as those who lost significant amounts of money by investing in mining towns, regional locations, house and land packages or off-the-plan properties.
Of course, a great advisor will do a lot more than that for their fee.
8. By being a student of history, a good strategist will be able to provide perspective, insights and often optimism at a time when the media is being pessimistic, and vice versa.
9. They will also advise their clients to invest their money the way they do themselves â€” they must be experienced investors â€” not enthusiastic amateurs.
10. A good strategist will regularly meet with their clients to objectively assess the performance of their property portfolio and ensure they are heading in the right financial direction.
As you can see â€” it takes years of learning, experience and the perspective that only comes from investing through a number of property cycles to become a great property strategist.
HERE ARE SOME THINGS A PROPERTY ADVISOR CAN’T DO:
As you read on you’ll find that some property “advisors” will claim to be able to do some of the things on the following list â€” things they really can’t do. I guess they tend to do this because they’re not able to deliver on many aspects on the list above â€” the things skilled, professionals advisers can deliver.
1. Even a good advisor cannot predict the future. They won’t be able to tell you how the market will perform, what will happen to interest rates or what capital growth rate a particular property will achieve.
2. They won’t be able to find the next hot spot for you, yet many so-called advisors suggest they can. In essence they give their clients what they are requesting, rather than what they need â€” sound, solid advice.
3. Even the most qualified advisor won’t be able to pick the best time to purchase an investment property other than to remind you that the best time to invest was 20 years ago, and the second best time is today.
4. A good advisor won’t be able to help you get rich quickly or achieve extraordinarily high returns without taking on extra risks.
WHAT IS THE DIFFERENCE BETWEEN A PROPERTY STRATEGIST AND A BUYER’S AGENT?
There is a big difference, even though many buyer’s agents will play this down, suggesting they are the right person to help investors.
In my mind, it’s important to have both as part of your wealth creation team.
Your property strategist will look at the big picture and formulate a strategy that makes sense to you after considering your current position, your aspirations, your time frames, your budget and your risk profile.
Buyers agents are order takers â€” they will fill an order given to them to find you a property, and will be biased towards the areas they have expertise in, but this may not be in your best interests.
On the other hand, only a property strategist has the expertise to design that “order” to suit your specific needs.
They will be your long-term wealth creation partner, annually reviewing the performance of your property portfolio, and will provide recommendations on any opportunities as well as when it’s best for you to do nothing.
A good property strategist is with you for “life” â€” your buyer’s agent shouldn’t be!
HOW DO YOU MAKE YOUR MONEY & DO YOU DISCLOSE ALL COMMISSIONS TO YOUR CLIENTS?
How we get paid depends upon the services our clients request.
Either way, at Metropole our fees are always disclosed in full before we start working with a client and we take no commissions from vendors, salespeople or developers â€” so there are no vested interests or bias in what we recommend.
Some of our clients pay a fee for service for a detailed strategic wealth plan, while others pay a success fee after we research, source, negotiate for and secure an “investment grade” property for them which has been valued by their bank at or above what they paid for their investment.
HOW DO I KNOW IF I’M GETTING RIPPED OFF?
That’s a good question as you need to find someone who’ll give you unbiased advice which is independent of any particular location or property.
Most so called “advisors” will only tell you about properties on their stock list or that their buyer’s agents can source in a particular state.
On the other hand, a trusted advisor tailors their recommendations to your personal circumstances and 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 they will have their own team of on-the-ground buyer’s agents in a number of states.
Not ones that fly in and out and think they’ve nabbed a bargain, while in reality the locals know they haven’t.
So one of the first questions I’d ask a potential advisor 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 the advice cannot be independent.
PUT SIMPLY, IF THE ADVICE IS FREE THEN YOU ARE THE PRODUCT!
Your adviser should be qualified and a member of a recognised organisation such as the Property Investment Professionals of Australia 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 for you depending upon your circumstances, should not make any recommendations at the first meeting and should not create a “sense of urgency.”
It’s interesting…all the successful investors and business people I know are prepared to pay for professional advisors in various categories of their life. On the other hand, most unsuccessful investors get no advice or “free” advice and then wonder what went wrong.
Of course, at face value professional advice can appear to be expensive, given that there is so much free advice available.
You know… free advice from the real estate agent â€” but they’re getting paid by the seller, or from the property marketer selling off-the-plan apartments or house and land package but they’re getting paid by the developer (and often quite handsomely.)
That’s why in my view, you should only be taking advice from someone who doesn’t have a vested interest in the outcome and therefore is working in your best interests.
IF I ALREADY HAVE A FINANCIAL PLANNER, DO I STILL NEED A PROPERTY ADVISOR?
The simple answer is most certainly yes, you do need to speak with a property strategist, because most financial planners are unable to advise on residential real estate as an investment class.
This is a real shame as many Australian’s go to a financial planner seeking advice on the best investment options for their financial future, yet their planner is not going to point them towards property because their license does allow them to.
And many of those who do, tend to make significant commissions by advising their clients to buy poor performing “off the plan” properties from project marketers who provide financial incentives for the financial planner to do so.
HOW MUCH DOES A PROJECT MARKETER (SPRUIKER) MAKE WHEN THEY SELL A BUYER ONE OF THEIR ‘RECOMMENDED’ PROPERTIES?
We’ve never sold this type of property or received this type of commission, but because of our large database of clients at Metropole, I often receive unsolicited offers from developers and project marketers asking me to recommend (read: sell) their properties to our clients.
I’ve been offered 5% commission just to pass on a name (not even to make a sale) â€”but commissions are often closer to 8% or 10% and I’ve been offered as high as 12%.
This plus the other marketing costs are built into the price the unfortunate investor pays for these properties.
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 or perspective. 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’s why it is suggested you leverage off the experience of a professional property adviser â€” a property strategist â€” one who is independent and unbiased.
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, propertyupdate.com.au, 3 April 2018