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How unclear goals can cost property investors a fortune

In almost every area of life, people are comfortable with the idea of paying an expert for their expertise.

If you want fantastic photos at your wedding, you’ll pay a professional photographer rather than relying on your friends and relatives to capture the moment.property buyer

And even if you’re handy around the house, you’re likely to pay a plumber to fix a leaking toilet.

But when it comes to buying real estate – whether it’s a home to live in or an investment purchase ­– people are less inclined to turn to a buyer’s agent to help them get the best bang for their buck.

This is even more confounding when you consider that statistics show that most property investors fail. 

People invest in real estate to gain a level of financial independence, but we know that the majority never get past their first or second property.

Stats also show that around 50% of investors sell in the first five years, which means they’ve bought something that didn’t suit their needs.

A buyer’s agent can partially address this problem by offering a depth of experience in researching as well as negotiating that you may not have.

But it’s important to know that buying a property is only half the story, and just going to a buyer’s agent isn’t enough.

I recently began working with a client in Adelaide.

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He’s a doctor and earns in an income inching towards half a million dollars per year.

He was looking to buy an investment property in Sydney and wanted to engage our services as a property buyer’s agent.

I asked if he’d invested in property before, and he confirmed that he owned two investment properties: a house in regional town in Adelaide and a mining town investment in Queensland.

Both properties were acquired through a buyer’s agent and both were positively geared.

However, he was unhappy with their overall performance, as neither investment had grown in value.

“Why did you choose these properties?” I asked.

And he replied, “Because the buyer’s agent selected them.”

So, let me get this straight…

Here’s a doctor who earns over $400,000.property market

That means he’s paying tax in the vicinity of $150,000 per year, on the highest possible tax rate of 45% (47% including the Medicare Levy).

He wants to invest in property and seeks out the advice of a professional buyer’s agent

And that buyer’s agent’s advice was to invest in a property that adds more money to his taxable income?

That just doesn’t make any sense!

Earning an extra $20 or $25 per week in positive cash flow isn’t going to do anything for him in terms of building long-term wealth.

Even double that (if you could get it) wouldn’t make a difference.

Clearly, his buyer’s agent forgot to ask him about his financial situation and what his goals were.bank-savings-house-couple-save-property-meeting-budget-300x199

Or perhaps this client wasn’t sure what he wanted to achieve in the first place? 

He obviously had an understanding that he could make money from property, but it’s important to dig a little deeper than that, to ensure that the properties you invest in will actually help you create the financial future you want.

The smarter move for this doctor would have been to add a capital growth property to his portfolio.

That is, a property that was negatively geared and that didn’t put any money in his pocket on a weekly basis, but which grew in value year-on-year.

If you’re not clear on your property goals right now, that’s okay

A good property strategist  will be able to help you decide what you want your financial future to look like, so you can create a buying strategy that helps move you towards those goals.

property mortgage finance money

Then and only then can a licensed, qualified buyer’s agent help you find the right investment to suit your needs.

Be sure to find out what their level of expertise is.

If they’ve been buying and selling real estate for 20 years, for example then they know what sells, what doesn’t, what properties are in demand and how much activity the market is supporting.

This is perspective and this is what you should be paying for.

They should know, for instance, that one side of the street is worth 15% more than the other side, because it’s got better views.

It’s information like this that can become your “secret weapon” as a buyer, and it is impossible to glean from internet research, monitoring the market or even the best property education.

If you’d like some independent unbiased advice about getting started in property investment, or for one of Metropole’s Property Strategists to review your existing portfolio click here and organise a free strategic property portfolio review.



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About

George is a Director of Metropole Property Strategists in Sydney. He shares his 27 years of experience in the property industry as a licensed estate agent and active property investor to help create wealth for his clients.
Visit www.SydneyBuyersAgent.com.au


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