Who do you ask for property investment advice?
A recent survey by the Property Investment Professionals of Australia (P.I.P.A) revealed the many and varied sources 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 two properties, a better question to ask would be:
Who should you ask for property investment advice?
Let’s look at who you could turn to:
1. No one
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 50% of first time investors sell up within five years.
2. Friends or family
I understand why you’d do this, but the question to ask is: are they financial experts? How many millionaires do you have in your family?
If they are not financial experts, don’t ask them because often their advice will likely be to avoid property investment because of the “risk”.
3. A real estate agent
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
While it’s important to have an investment savvy mortgage broker on your side helping you through the finance maze, they may not understand the property market well enough to advise on what is an “investment grade” property.
5. An accountant
Your accountant should advise you on tax matters and structuring, but they may not have the intimate knowledge of the property market required to give investment advice.
6. Financial planners
While financial planners are licensed to sell financial products, most are not able to advise on real estate.
This may be because they don’t have a sound understanding of property, or the company they work may also not allow them to.
And some of those who do recommend property usually have a biased view as they make commissions based on the investments they sell from their “stock list”.
6. A property marketer
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.
7. Investment seminars and workshops
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?
8. A property mentor
There seems to be an abundance of property mentors aroundâ€”some who give great guidance, while others who are really property sellers or marketers in disguise.
Don’t get me wrong, I believe 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 same results you want to achieve.
8. A buyer’s agent
These can be a great help in selecting the right property but many are just “order takers”â€”they don’t devise a plan that takes into account your family’s future needs and your risk profile.
That’s why you need …
9. A 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 involvedâ€”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 does not have any advisers. Or they get their advice from salespeople who they perceive as advisers but who 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.
How can you tell that you’re dealing with a trusted advisor?
A trusted advisor tailors their recommendations to your personal circumstances and they 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 one of the first questions I’d ask them 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 their advice cannot be independent.
Your adviser should be qualified and a member of a recognised organisation such as 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 depending upon your circumstances, should not make any recommendations at the first meeting, and should not create a “sense of urgency”.
The bottom line there is only so much you can learn from the financial media, books and seminars.
And while you can gain knowledge from the internet, you can’t gain experience. That takes years to acquire and it 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 takes time, money and it also comes at a cost.
That’s why I suggest you leverage off the experience of a professional property adviserâ€”a property strategistâ€”who is independent and unbiased.
Sound professional advice is never expensive, on the other hand most investors pay a huge “learning fee” to the market by buying the wrong property, in the wrong location, at the wrong price.
Michael Yardney is a director of Metropole Property Strategists, which creates wealth for its clients through independent, unbiased property advice and advocacy. He is a best-selling author, one of Australia’s leading experts in wealth creation through property and writes the Property Update blog.
Michael Yardney, Smart Company, 25 January 2017