First . .a confession. I'll say right up front this will be a bit of a sarcastic blog. But after years and years of watching what happens to people who become victims of bad advice, I have finally reached my limit and it's time to speak up.
When you're buying your next property, please be careful about who you listen to. I know it's tricky to know who to believe, but there's a few ways to identify when a 'buyers agent' or property 'educator' is looking after your interests (which is what they're supposed to do) or whether they're just out to fleece you from as much money as possible.
If you find yourself in any of the following situations, obtain further information before progressing.
* You don't pay a fee because the agent is paid by the developer – so . .you save money, right? Wrong. You will pay a higher price for the property because the commissions are loaded into the purchase price, and you're paying more than the property is worth.
* You pay for a 'lifetime membership' and then get 'exclusive' deals at reduced rates. Ah . .no. You're just locked into to a false discount. Move on.
* You pay for 'education' and you receive 'support at each step of the way' with the educator selecting property that is 'just right for you'. The reality is you're being 'trained' in the way the advisor wants you to be trained, so you will just buy whatever the trainer puts in front of you.
* You've decided you want to buy new property, so you speak to an 'advisor' who will get you the best price. Wrong again . .apart from paying too much, you may also be tipped into a property where the build quality is so poor you will be lucky the property stands for more than 12 months.
The sad fact is that in our work at The Property Frontline we see people all the time who just can't get out from the grip of a negative portfolio that is sapping money and dragging the owners backwards. The owners end up with a triple punch because they have not only paid too much for a property, they're in a situation where they can't purchase more property, and then become disenchanted and cease investing all together.
When you're ready to invest your hard earned money, your goal should be to select the best possible property from the full range of properties both on and off market. Your best line of defence against poor advice is to do a quick market comparison for any property 'presented' to you. This is particularly important when considering off market 'deals', new property or house and land packages.
If you have decided you would like to purchase new property, ensure your advisor is providing you with independent advice. Miss this key criteria and all you will be sold is properties on the advisor's list, which could be the worst projects on the block.
Here's an insider tip – the worst properties are those that receive the hardest sell. In other words, bad properties will receive the flashiest marketing and biggest commissions for the 'advisor'. Good properties will always require effort to acquire them and will need very little marketing.
No commission and no bull
At The Property Frontline, we don't take commissions because we know this clouds the decision making process and cuts off approximately 95% of your market choice. When I'm looking for a property I want to be sure I am getting the absolute best price from the full selection of properties available – both on and off market – and that's also what we want for our clients.
We're proudly independent and unbiased which means our clients have access to every one of the 9,800,000+ properties within the Australian market. You will see plenty of advertising where the advisor will say they are independent, but if they don't charge a fee, they are taking a commission which limits your choice and outcomes. It also means the advisor is engaging in misleading advertising.
If the advertising is misleading, then you can bet the advice is misleading or, at best, misguided. Advertising for new property is becoming increasingly screechy, with the following lures put forward to the unsuspecting public. Outlined below are some of the more common claims.
It's better to buy a new property because 'the government pays you to hold the property' . This refers to the incentives the government provides for new property and the use of depreciation. But depreciation deductions don't last at the same rate forever, and if you lose your job you won't have any income to offset the deductions. Bye, bye house.
It's better to buy new because you will attract better tenants. If this is true, then why do the jokers flogging the property include a 'rental guarantee'? If a property needs a guarantee, then there's something wrong with the property. Walk away.
It's better to buy new because you won't have to spend money on maintenance. Oh boy. Ignoring the fact that even good builders can make mistakes that require repairs, it can take new property nearly two years to settle in. While this is happening, all kinds of issues can emerge. You may have a builders' guarantee in place, but who wants to spend months chasing the builder to fix the problems . . that's if he's still in business.
There's consistent capital growth. Really? How can they make this claim? Because you can add so much value to a property that is on a postage stamp sized block of land? The answer is NO.
We have shortlisted the best projects according to solid research. Nope. What they're often saying is that they have a list of projects with the best kick backs for the advisor.
With new property, it's best to hold for the long term. This one is particularly depressing because it's based on the fact that property is a long term investment. But in the case of most new property, you will need to hold it for the long term because you will have to wait a very long time for capital growth (which may never materialize in your lifetime). Also, if you sell, you will need to pay back the depreciation which attracted you to the purchase in the first place.
While the traps are easy to fall into, it's exceptionally easy to protect yourself from a bad purchase. Just do a quick check on any property portal to compare the property you're considering against other similar properties in the area. Pay particular attention if you're buying in a new suburb, as you may find the suburb right next door is selling better property at lower prices.
Looking over the comparison above, it's easy to see the key differences between the properties. But a commission focused advisor won't present you with this information. All you will see is beautiful mock ups of happy and skinny people sitting in a shiny new property. The reality, after it's too late for you to pull out, is that the property may never look like the brochure and you won't be one of those happy people.
The other aspect to the current flogging of new property is the people involved in pushing it. Some well meaning advisors are so clueless they won't even know other opportunities are available. Many don't even have property of their own, so how can they be providing you with 'advice'? It's always best to check the background and qualifications of the people you're buying from, as well as the property they're 'presenting' to you.
Disclaimer – This information is of a general nature only and does not constitute professional advice. We strongly recommend you seek your own professional advice in relation to your particular circumstances.