Updated: Apr 27
TIPS FOR THE KEEN PROPERTY INVESTOR IN AUSTRALIA OR ANYWHERE IN THE WORLD These are collections of tips based on true experiences.
Property investment "gurus" are everywhere. Many claimed to have built multi-million portfolios in as little as 5 years, and claimed to be experts at doing that. Are they spruikers? Or are they the real deal? Here are some tips and pointers to help you understand what's going on. When you started with your investment journey, investing in anything is interesting and you probably wanted to explore everything. Shares, Options, Rights, Crypto-currencies, Properties, etc. Here in Australia, property is probably the most consistent and stable performer. In Melbourne, property prices have, on average, grew 7% every year. IE, prices doubles every 10 years, and triples every 16 years. In an average adult's useful working life of 30 years, prices would have grown 7.6 times. That means, that cheapie $100,000 property which you bought when you first started work, would be worth $760,000 when you start to retire. Now, name an investment vehicle that gives you this sort of returns. Exclude the speculative roller coaster Crypto-currency.
More adventurous property investors would be also be exploring development, joint-ventures, renovations, etc, in addition to the regular set-and-forget buy-to-rent strategy. Contrary to the hundreds of narratives out there, anything more then your buy-to-rent property investment would be considered "advanced" investment strategies and they are not for the faint hearted. These are high-risk, and potentially high returns property investment projects. People have lost millions in the failed development projects.
If you are into these advanced projects, here are some tips which all property investors have to know.
First Tip: Trust No-One
Be cautious with whoever you are dealing with. No one is going to look out for you. NO ONE. You need to look after yourself and your hard earned cash.
Second Tip: Use Tools
Use tools that are easily accessible to help with your research, don't rush into anything, take your time, deals will always be there. It may not be the one you're researching about, but what you have learnt along the way will help with your next deal. More advanced smart tools can help with your research, but these are usually subscription based, and would typically cost between $200-300 per month, in subscription. Because of the costs, these are usually not for the individual, and are usually meant for professionals and businesses such as buyers advocates, buyers agents and professional property developers.
Do google searches and check online reviews on everything, the people you are going to do business with, the companies they represent, google is usually your best friend, use it. But do understand that everyone can post ANYTHING, good or bad, about something. Learn to differentiate truth from fake.
Third Tip: Check Licences
Because scammers are everywhere, there is a need for the government to protect individual investors. Thus the almost everyone dealing in property, real estate, and building, development, have to be registered, licenced and properly insured. Licencing and registration helps to ensure these people are properly trained, regulated, and end-consumers like yourself are protected.
Learn to know the differences between mandatory licensing and optional memberships. When you are dealing with your real estate sales agent, property manager, owners corporation manager, buyers agent and buyers advocates, they have to be licenced. However, being membership of REIV and REBAA are optional. These are often more about branding and marketing that protecting consumers. Different business choose whether to be members of REIV/REBAA depending on their marketing priorities. It is optional. But as long as the agent you are dealing with is selling, buying, managing your property, they have to be licenced and insured.
Make sure you check their licenses. Check if they have the license to do what they are doing. Be it your real estate agent, the sales person who tries to sell you a property, your tradespersons. Check with the local authorities that the licenses are up-to-date, etc. Anyone will try to sell you something for a quick buck. Only the properly licenced ones can give you the right protection you need.
Fourth Tip: Do some background checks
If you can, do background checks on the persons you will be dealing with, especially if you are going to invest your hard earned cash with this person or company. There are so many online websites for a few dollars that can run these checks for you.
Fifth Tip: Ask for References
Either online references, or clients who have done business with them, ask for references, and if you can, ask to speak to them. This is so important as it gives you an idea of who you are about to do business with. Ask in forums, ask your friends, and search online. Also, do understand that some businesses, such as buyers agents, could be sensitive and their clientele might not always welcome the idea of providing references. Always respect the clients privacy needs. If respecting the client's privacy does not gives you the comfort to deal with the business, walk away.
Sixth Tip: Legal Stuffs
Legal paperwork, before you sign your life away, pay the money and get a second opinion on what you are signing, I wish I had done that once and I wouldn't now be in such a situation! Always get a second opinion from a lawyer that you have found, not someone recommended by the seller.
Seventh Tip: Trust Your Instincts
If something presented to you sounds good true to be true, it usually is. Trust your gut, if something doesn't feel right, it probably isn't right. In general, be wary of people who are very good sweet talkers. On the flip side, "Instincts" and "gut Feel" is more often than not, based on EXPERIENCE. While some good things could be too good to be true, there are indeed some good deals.
Experience plays a part. Knowing the area and what you are getting into, also help our buyers agents to confidently tell you if we've found a good property worth buying. Some deals can be very obscure, very specific, and can be snapped up very quickly. Thus, when our buyers advocates say "it is a good deal and you need to action quickly", it usually is. We might not have the time to do a complete due diligence, might not have the luxury of time to explain everything to you, or extrapolate the profit down to the last cent, but, hey... didn't you engage our buyers agency services so we can help you find a good deal confidently and quickly?
Eighth Tip: Two Side to a Coin
With everything, there is always a good and the bad. Make sure you know all the PROS and CONS of anything you are going into. Know the risks involved, and have a plan to deal with it or an exit strategy.
Ninth Tip: FOMO
Please do not give in to the hype of "HURRY NOW OR YOU WILL LOSE THIS DEAL" from a sales person. In fact, be very skeptical. Always remember, if you are not paying the licenced real estate agent, he/she is getting paid from the seller/vendor. And, under the regulations, they have to look after the interest of the SELLER. We've explained this here.
Take your time, do your homework. Remember, if you are buying and you didn't pay your agents for his/her services, the agent is working against you.
However, if that comes from your independent buyers advocate, it is 99% true. Your Buyers Agent has to protect your buying interest explained here). And when they say "FAST", it means fast. We've been buying for over 20+ years and we've seen properties sold within hours. It is listed in the morning, and sold in the afternoon. So, when our buyers agents tell you to be FAST, we mean FAST. Our agents would have done their research in the area, and has sufficient information to be confident with our recommendations.
Tenth Tip: When Your Salesperson Also Bought One
You'll probably have heard this too often. Isn't it interesting that your agent have "just bought one" too. Yes, the free property agent who's helping you to build your portfolio, have also bought this. This is a very common marketing line. We know, as we use that line if we've really bought one.
It is so effective, and we often have buyers asking "why are you buying". We wished we have a bottomless pocket. We wished we can buy every good deal that we recommend. But, we don't. We have limited budget and even if we have unlimited budget, we will not buy everything. It wouldn't be fair to our clients. Our clients come first, if they've engaged our paid search services. They will have the first dip and the right right to refuse if we are acting for them and have found a good deal on their instructions. That's our commitment to our clients. No games, just being fair.
LAST BUT NOT LEAST...
If you've noticed, marketing emails almost always comes with lengthy disclaimers and advice warnings. They were written for a reason, read that fine print. We sincerely hope for each of you that you never have to experience what it is to be scammed and to lose a whole lot of money. But sometimes, we are just too trusting. There are people out there who do not really care about you or your situation. So, before you say you have money or lots of equity, be wary of the vultures you could be attracting. Understand the real estate industry.
There is no free lunch. If you are not paying for the services, the agents are not working for you. You are the target.