You Need to Ask Your Property Adviser Better Questions
Make a Wise Property Investment Decision
Buying property is an investment decision that should not be taken lightly. It requires an all-encompassing amount of research and decision making before a selection is finalised. And with close to every property being widely marketed to the public, it is important that investors carefully weed through the ‘glamorous’ advertising and the associated promises in order to make a wise property investment decision. Otherwise, problems are likely to arise.
Nowadays, a wealth of information pertaining to marketable properties is available online at anyone’s fingertips. Furthermore, additional information and specific advice can be easily sought from a realtor, property advisor or by attending a property seminar. But in truth, there is much more to it that meets the eye. Investors have to learn how to decipher the information, ask better questions and read between the lines of all the marketing hype presented to them.
One good example is found in the number of people who try to pass off their own personal property portfolio as an example of their investing expertise. They are self-proclaimed property "advisers" and "experts" who, more often than not, lack any formal qualification to support their claims. And in some cases, their professional experience and background in the industry is narrow which limits their ability and justification to offer advice. These individuals fail to fully divulge important information that should be clearly be present alongside the marketing hype they put in their own portfolios.
For example, would you trust someone right away who says they own 35 properties and is still investing? How about someone who says he has a multimillion-dollar property to his name? No matter how impressive these may sound, there might be some truth cloaked behind those lines. And this is why investors need to learn to ask better questions when they are considering buying a property.
In the examples given, the property adviser may have 35 properties and has money to buy more, but did he mention how well these properties are performing? Did any of the properties grow in value? And although the multimillion-dollar property may sound pretty remarkable, has the property expert divulged his loan-to-value ratio? For all you know, the property could have a 95 percent loan-to-value ratio; which, in reality, is really unimpressive and is a very high risk.
It's important that you understand the different types of marketing fluff that are being used in the industry to sugarcoat the truth. The same idea can be seen on a product with a ‘Fat-Free’ message on its packaging as a way of attracting people to buy it. The ‘Fat-Free’ statement may be irrelevant if that particular product does not contain fat, yet has a high amount of sugar in its contents. This is a common marketing ploy to distract people from buying one thing yet end up buying something far worse than what they are trying to avoid in the first place. This is a pretty common strategy that project marketers and selling agents use as well.
Some of these issues stem from a lack of regulation governed by the Australian Securities and Investments Commission (ASIC) in the property advice sector. On the contrary, those involved in the sectors of financial planning, mortgage and insurance are under strict regulations. Furthermore, in order to obtain work as a property advisor, a minimum education requirement and continual professional development is not imposed. This notion alone should be concerning for first-time investors.
Investors should learn how to understand the different ways advisers promote themselves and the real estate properties they represent in every transaction. One way to safeguard yourself against these flowery marketing terms is to know how to ask better questions. Ask things like:
How many properties in your portfolio have not been doing well and why?
How much debt do you currently have against your portfolio as opposed to the total value?
How do you generate an income?
From sales commissions?
Selling investing courses and mentoring?
Developing and selling for profit?
Or do you build your wealth solely from property investing?
Would you personally purchase a property that's unlike the one you are currently promoting? If so, what about it makes it different and in what location?
What historical experience do you have with personally investing in this or an equivalent location?
What is your personal risk profile and how is that reflected in your portfolio ?
It's never about what a property adviser or expert will tell you, rather what they choose not to divulge readily. Asking these questions can help you have a better grasp of the expertise of your property adviser or expert.
For trusted independent property advice, utilise the expertise of a qualified buyer’s agent / buyer’s advocate. They will provide a balanced and objective view which will help you achieve your goals. For more information or to discuss a tailored plan for you, contact our friendly team of buyer’s agents today.