STRATEGY | BEGINNER’S GUIDE TO INVESTING
PART
TH RE E
Finding the properties that
will make you big profit:
Your ultimate
purchase plan
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STRATEGY | BEGINNER’S GUIDE TO INVESTING
In Part Three of our beginner’s guide
to investing, we show you how to
create a comprehensive buying plan
to help you build a solid portfolio that
you can retire on sooner and richer.
Your Investment Property reports
t is easy to think that once you have decided on an investment strategy
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right? Wrong!
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STRATEGY | BEGINNER’S GUIDE TO INVESTING
STEP 1 Creating your own
6
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CREATING A BUYING BRIEF
Decide what you’re trying to
achieve from the purchase and
how this fits into your long-term
portfolio-building strategy.
CONDUCTING
MARKET RESEARCH
This involves in-depth research
from macro to micro level of the
buying brief.
buying brief
Before you enter into any investment, not just property, it
is important to understand what your end goal is before
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an understanding of these goals should be to compile a
buying brief.
The ideal buying brief should take into consideration your
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your market research you are headed in the right direction
in terms of property choice and return on your investment,
as opposed to having other factors like emotion and visual
appeal cloud your investment choice.
Empower Wealth CEO Ben Kingsley says that, to do
this, you need to identify your personal goals and needs
– in thHVKRUWÀYH\HDUVPHGLXPWR\HDUVDQGORQJ
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early retirement or a comfortable retirement down the line.
This means you need to carefully analyse and take into
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INSPECTING AND SELECTING
You need to attend open
inspections to get an
understanding of the pricing,
demand and quality of properties
in the area, and then to shortlist
the properties that are showing
some potential.
PERFORMING DUE DILIGENCE
This is the stage at which you
check contracts as well as
conduct building and pest
inspections/strata reports, etc.
NEGOTIATING FOR
YOUR PROPERTY
You need to prepare for direct
negotiation with the agent or
vendor, or for attending auctions
and strategies to bid at auction.
SECURING THE PROPERTY
ON THE BEST POSSIBLE
TERMS AND PRICE
Ensure this is done appropriately.
CASH FLOW CONSIDERATIONS
„ The income coming into the household
„ The household’s cost of living
„ Any surplus income
„ Any possible future income changes, like starting
a family or having to live on one income
“It is all about determining your ability to hold the asset
for the medium to long term, which is critical for capital
growth,” Kingsley says.
All these elements also need to be considered in order to:
1 Establish a realistic price point – which, in turn, impacts
on whether you can purchase one property or more and
on what type of property you can buy
2 Identify whether you need to focus on capital growth and
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Kingsley says that if you have a strong income surplus you
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capital growth. Such properties will create equity more
quickly and enable you to buy more properties sooner.
However, if you’re low on cash, going for higher rental
yields could be a better option. Properties that generate
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turn makes it easier to hold on to your investment property
over the long term.
Determine your ideal buying brief/wish list
The more you concentrate on properties that have general
market appeal and at the same time have scarcity value,
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STRATEGY | BEGINNER’S GUIDE TO INVESTING
REALITY CHECK: Questions you
need to ask yourself at this early
stage include:
„ Can I service the level of debt required?
„ Do I have the cash flow to maintain and hold
a property over the medium to long term?
„ Is my focus on equity creation or improved
cash flow?
„ What is my exit strategy or end game?
the higher your chances of capital growth due to this
high-demand, low-supply equation.
In creating your wish list, you should consider what
features a prospective tenant or future buyer would see
valuable in a property (see Checklist, p31).
Putting theory into action
When tailoring your wish list to your investment needs, you
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some ways. Your budget may not allow you to tick off all of
the requests on your wish list, and you may need to make
compromises in order to stick to your target purchase price.
For example, it may not be achievable to buy a
beach-front house with all of the features on your wish list
and a $400,000 budget. This is when you may need to look
at other areas, say interstate, or at other asset types (eg a unit
rather than house and land), to gain what you require.
If you’re looking to create equity quickly,
your working plan might look something
like this:
„ You should target markets that are showing good
capital growth and are on the way up in their cycle.
„ Within such a market, isolate properties where
value can be added quickly via renovation or
development.
„ Buy a property on a large block, subdivide it and
build on it. The end result equals two properties in
a sought-after area.
“Whatever you purchase, it has to go up in value,” Trilogy
Investment Property Funding CEO Ed Nixon says. “It
needs to be in a high-growth area – not somewhere in the
middle of nowhere, where it might be getting decent yields
but just doesn’t grow in value.”
Results Mentoring coach Brendan Kelly agrees, and
emphasises that each different strategic approach will also
impact on your brief and buying criteria. For example, if
you want to get the best value out of a buy-and-renovate
approach, you should focus on older houses, whereas if you
want to subdivide you need to focus on land block size.
AUGUST 2014
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STRATEGY | BEGINNER’S GUIDE TO INVESTING
After putting together a buying brief, the next step is to
devise some comprehensive buying criteria.
This helps you to:
„ establish the suburb and property price points that are
workable for you
„ identify the features of a suburb that make its market
best suited to your needs, for example lifestyle options
attractive to young professionals and which will drive up
value, leading to capital growth
„ clarify the type of property and the property features
necessary to meet their requirements, eg older
three-bedroom house with a garden, suitable for
value-adding renovation and for renting to families
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area features and the right types of properties
“You need to know a suburb’s market well and what prices
in that suburb are like. This is so you can loosely forecast
a wave of growth, and so – if selling – that you can then
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rely solely on median prices to identify a good buy. Detailed
analysis is critical.”
STEP 2 Conducting your research
The second part of the buying process involves conducting
appropriate market research on the types of properties you
listed in your buying brief (wish list). You should identify all
available and appropriate properties in your target location
and compare them by sold price (not asking price, as this
is just real estate agent opinion), features, sales history and
rental yield.
You can access sales records using the online property
research websites of Residex, RP Data, Australia Property
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RP Data and APM are good for researching at asset level
and Residex is good for capital growth predictions, while
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demand indicators such as vacancy rates, stock on market as
well as other tools to narrow down your search.
When browsing these online research centres, assess each
of the available and appropriate properties you have found in
your target location for their capital growth over the last 12
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better long-term performance record). Or, if it is rental yield
you are focused on, then you should look at the rental returns
of the properties (also included on these websites).
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you may need to compromise on a few elements on your wish
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After conducting this initial research, add all of the
properties you’ve found to an extended list. Then use this list
to develop a shortlist of properties within your price range
that have high potential and warrant a physical inspection.
There are varied rules of thumb out there among buyers’
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the price range and buyer activity in any one market.
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Tips for open inspections!
There is a lot of debate around whether you should
ask the agent questions on the spot when you
are inspecting a property. It is a good idea to try
to find out about the vendor’s motive for selling;
however, this type of research can be conducted
post-inspection by researching on the internet,
calling the agent, or even having a friend call up
on your behalf.
You will generally find out a lot of good
information and what the market is saying about
the property by listening intently as you enter, while
you’re inside and as you leave. Don’t reveal your
auction bidding limits and other buying strategies
to other potential buyers.
This way the selling agent (and other potential
buyers) will know as little as possible about what
price or terms you’re trying to secure the property
at. Don’t forget that the agent is working with the
vendor to obtain the highest price possible, not
with you, the buyer.
Answering their questions on site may imply
that you’re very interested in buying the property,
and it can reduce your power during the
negotiation stage.
Requesting a contract is often a good idea to
show your interest without revealing too much to
the agent. This also generally ensures that you are
kept in the loop on progress with the sale, but never
100% as the real estate agent won’t always call you,
even if you have stated that you’re interested, and
will just transact the property sale under instruction
from the vendor to do so. So you need to walk a fine
line between being overkeen and underkeen. This
comes with experience.
STRATEGY | BEGINNER’S GUIDE TO INVESTING
CHECKLIST FOR FINDING THE BEST INVESTMENT PROPERTY
LOCATION (preferred
state, city, suburb
and street)
Where do you need the property to
be located? Not all states move in the
same direction at the same time, so it
is important to identify which part of
the cycle your preferred state is in.
Is it in the recovery part of the cycle
or is it at the top of the property
cycle currently?
What holdings do you have in
each state?
Should you diversify your
geographical risk as well as look at
how adding properties in a state
that you’re heavily weighted in can
impact on your land tax threshold
moving forward?
DEMOGRAPHICS
What are the area’s
demographics and what
demographics are desirable for
tenants or future buyers? It is
extremely important to research
this, but sometimes the data is hard
to get access to.
Look at what demographic changes
are expected for the area in the next
five and 10 years. Council is a great
start – future development control
plans, local environmental planning
policies, as well as state-based
policies on planning can influence
an area’s future demographic and
growth with state environmental
planning policies.
Consider different generation
trends. Baby boomers are strong
advocates of land content in the
middle-ring suburbs, but Gen X and
Gen Y favour land value over land
content as they prefer to live closer
to the city, even if it means living in
an apartment instead of a house. By
2020, the latter two generations will
represent 70% of the workforce, so this
factor is important when deciding on
the type of property you should buy.
AMENITIES AND SERVICES
Which of these would be
convenient for tenants or future
buyers to have near the property?
bedrooms), then renovate to increase
local demographic appeal, increasing
equity and rent in the process.
PROPERTY SIZE
How big do you need the
property to be (eg block size for
a house or square metres for a unit)?
This relates to current and future
demographic demand but can also
impact on financing approval if too
small, eg when units have an internal
size smaller than 50sqm, this lowers
your financing options considerably.
PROXIMITY
Proximity to schools,
shopping, transport,
employment, entertainment and
recreation. Good schools can be a
massive driver for owner-occupier
families, especially in the higher end of
markets in capital cities. Think Dulwich
Hill, home to one of the most coveted
schools in Sydney, where prices have
skyrocketed 18% in the past 12 months.
PROPERTY TYPE AND
CHARACTERISTICS
What characteristics do you
want the property to have (ie kitchen,
number of bedrooms and bathrooms,
balcony, outdoor areas, garage or
carport, etc.)?
More importantly, does this match
the current demographic ‘wants’
and future ‘wants’ of the area? We
constantly look for properties in
high capital growth areas that don’t
suit the demographic (eg a one- or
two-bedroom home in an area that
demands a minimum of three to four
PRICE RANGE
What is your price range?
Does this include or exclude
renovations?
If you are adding value, where will this
money come from? Will it be cash or
debt funded?
POTENTIAL
What yield and/or capital
growth do you need to keep
cash flow coming in and to leverage
growth down the track?
Generally, the higher the capital
growth, the lower the rental yield,
and vice versa, but if you buy well
you can buy in a historically highcapital growth area and manufacture
a higher rental yield through ‘smart’
renovations or development.
It is near impossible to do the
opposite as it’s harder to control
capital growth because this means
controlling the appeal of not only
the asset but the area and its
surroundings.
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STRATEGY | BEGINNER’S GUIDE TO INVESTING
This 100-property minimum will help you derive what is
a good-value investment for your criteria. It may seem like a
lot of properties, but it really isn’t. In any given weekend you
will view around 10 properties. So, two and a half months of
market research and open inspections really isn’t that much
time to dedicate to such a big purchase.
This period is essential for you to gain a good understanding
of the value of the property features detailed in your buying
brief. It will also ensure that you are able to spot good value and
determine what you should be willing to pay for a property.
More importantly, not only will you start to understand local
pricing, but you will also start to understand the supply and
demand mechanics of that area at that point in time, and
generally the best time to buy is when demand is low and
supply is high, as opposed to the other way round.
Supply and demand factors
When researching a suburb, Kingsley recommends that you
take into account both the supply side and the demand side of
the equation. This will give your analysis of the market more
accuracy.
When researching supply factors
you should look at:
„ Amount of current stock on the market
„ Property stock coming on to the market
For example, are there developments planned for
the area over a period of time?
„ Property types by number of bedrooms. For
example, knowing how popular four-bedroom
houses – which are good for rental capacity – are
in a market indicates whether there is a demand
for that type of property
When researching demand factors
investors should look at:
„ Auction clearance rate by suburb. This indicates
whether or not there is heat in the marketplace
„ Average time (days) stock is on the market.
This indicates how quickly stock is moving in
the market, and thus the demand for that stock
„ Demographics – ie who wants to live in the
suburb and who is buying in it? For example,
if owner-occupiers are buying, that is good for
investors as owner-occupiers boost both the
value and the desirability of a suburb
„ The status of drivers like transport options,
employment hubs, education facilities and
lifestyle features of the suburb. The better served
a suburb is in these areas, the more desirable it is
to live in
„ Rental vacancy rates. These determine how much
rental stock is on the market and whether there is
pent-up demand for it
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“Anyone who thinks they
can get away with less than
100 hours of research is going to
be short-changing themselves”
Kingsley says this research is, essentially, complex
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think. “Anyone who thinks they can get away with less
than 100 hours of research is going to be short-changing
themselves.”
The type of data that provides
valuable suburb performance
information and insights includes:
„ Median price information
„ 10-year growth performance figures
„ Stock on market
„ Auction clearance rates
„ Rental yield information
All of this type of information is available from
data providers like RP Data, Australian Property
Monitors, OnTheHouse, DSRScore.com.au and
Real Estate Investar. Your Investment Property
(www.yourinvestmentpropertymag.com.au) also
publishes all this information for your convenience
„ Property sales information from websites like
RealEstate.com.au and Domain.com.au
„ ABS demographic data on population and
employment growth or decline in a suburb, as
well as on household income and make-up
„ Trending data on such things as median prices
and vacancy rates over time is available in the data
section at the back of this magazine
The purpose of this step is to help you create a shortlist
of propertiHVWRGR\RXUÀQDOURXQGRIGXHGLOLJHQFHRQ
STRATEGY | BEGINNER’S GUIDE TO INVESTING
STEP 3 Inspecting and selecting
Personally inspect the 100 or so
properties you have selected from your
market research and compile a report on
the following:
„ The initial feel of the property and aesthetics
„ The floor plan
„ Features and characteristics
„ Its potential rent/yield (based on local
comparables obtained)
„ Any possibility to add value, and areas that will
require repairs (try to take photos), and if so
quotes on how much they will cost (the more
‘fixed price’ quotes the better)
„ Its location within the street
„ Its outlook and orientation (note whether there
is any possibility of being built out)
„ Neighbourhood profile (approximate ratio of
tenanted versus owner-occupied properties)
„ Proximity to local amenities, schools and
transport, area/suburb profile and its
demographics
STEP 4 Conducting due diligence
Due diligence is a crucial aspect of the buying process, yet it
is common for buyers (even the most experienced ones) to get
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this step and move straight on to negotiating the sale, or
perform this step poorly. If done incorrectly, this can become
a rather costly step.
This is a huge mistake because it is the stage at which you
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intend to purchase.
During the due diligence stage, buyers should be sure to:
1 Get an expert such as a lawyer, solicitor or conveyancer
to review the contract before signing. This review will
expose the exact terms and conditions that make up the
contract of sale between you, as the possible buyer, and the
vendor.
2 Review this with your legal representative and have them
suggest any areas you might want to amend in favour of
you as the buyer. For instance, you may want to request
that the deposit be lowered from 10% to 5%, or that
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contract.
The conditions you seek and how they are accepted will
vary from state to state and property to property. It is also
important to not go too far in negotiation either.
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it is important to secure it, and you’re trying to get a 5%
deposit accepted when you have more than 10% deposit
to cover it, will this risk the deal being not accepted?
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ie is it worth risking putting the vendor or real estate
agent offside? In a hotter market 10% will be asked for;
conversely, in a slow market or for a property with little
demand, 5% deposit may be accepted.
STEP 5 Negotiating
From the 100 or so properties you’ve inspected, select a
shortlist of around 10–20 preferred properties to conduct
further due diligence on. You will probably do this naturally
after viewing many of the properties in person anyway.
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sure you organise a building and pest inspection (for a house)
or a strata report (for a unit).
These reports will reveal any past or potential future costly
problems with the building and surrounds, including an
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are discovered.
Any negatives that come from your due diligence should
then be weighed into your decision to either start negotiating
on a purchase price for the property or walk away from the
deal. You may also be able to negotiate a reduction in your
purchase price to cover any discovered issues.
If you conduct a strata report and are unsure from its
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– $500 spent now could save potentially thousands of dollars
STRATEGY | BEGINNER’S GUIDE TO INVESTING
down the track in special levies. Be wary of future works in
unit blocks as these could result in a higher levy down the line.
It is important to know that the due diligence and
negotiation stages go hand in hand in many ways. These
processes may happen simultaneously, especially if there is a
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The art of negotiation
One of the most important parts of the negotiation process
is preparing for the actual negotiation; that is, obtaining the
true market value of the property.
Remember that the listing price doesn’t mean anything
during the negotiation process. To avoid overpaying and facing
costly expenses, have an independent valuation of the property
done before the negotiation period begins. This may cost you
between $200 and $350 but it will be money well spent if you
can negotiate an extra $10,000 off the sale price of the property.
Alternatively, you can research properties that have sold
within a 1km radius of your property over the last three to 12
months. This will give you an idea of how much the property
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Developing your negotiation strategy
Going into the negotiation stage, you have to remember to
take your emotions right out of the game. You’ve all heard
this a thousand times before but the phrase isn’t getting any
less relevant.
Go into the process knowing your target price and
contractual terms (such as your preferred deposit amount and
settlement timeframe) and stick to them. However, keep these
initial terms reasonable because the more conditions you
attach to the contract, the more constraints there are for the
vendor. You don’t want the vendor to become rigid with the
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If the vendor seems protective of their terms, turn
the tables on them by using your due diligence. Draw
upon whatever information you were able to gain as to
their reasons for selling. Think about whether the agent
mentioned if the vendors needed to settle the property
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settlement period. If the vendor requires a shorter settlement,
you might be able to negotiate a few thousand dollars more
off the sale price.
At the negotiation table
Understanding your risk profile
Creating a risk profile, which means working out
the risks involved in an investment and how to
manage them, is a useful exercise for anyone
planning to become a property investor.
Empower Wealth CEO Ben Kingsley says people
need to be financially comfortable about what
they plan to commit to. “At the very least people
should have an understanding of the type of
risk they are looking to take on. They also need
to assess themselves as low, moderate or high
risk-takers.”
Kingsley recommends that beginner
investors ask themselves the following risk
assessment questions:
Would the type of property adjust
your risk tolerance? For example, how
would you feel about investing in a
mining town and spending around a
million dollars to do so?
Would going into debt, or a particular
level of debt, adjust or impact on your
risk tolerance?
Look into an agent’s credentials: are
they a member of REBBAA, PIPA and
the relevant state institute? What
qualifications do they have?
How long are you planning to
invest for?
What investment returns are you
looking to achieve? Remember that
the higher the expected returns, the
higher the risk.
If you’re uncomfortable with negotiation or haven’t done it
before, it might be useful to hire a professional buyer’s agent
for this part of the buying process.
AUGUST 2014
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STRATEGY | BEGINNER’S GUIDE TO INVESTING
TOP TIP!
If you’re an experienced investor looking to add another
property to your portfolio, the best way to negotiate is to
not care too much about the property you’re negotiating
for. Set a benchmark price (considering the known market
value of the property) and if the negotiation goes above that
ceiling price, move on to the next property.
You might spend a lot of time going from property to
property, but setting that benchmark will ensure you don’t
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purchase as you develop your portfolio.
Negotiation is an art and it’s near
impossible to cover all the strategies
in one article, but some that come to
mind that we are constantly being asked
about are:
„ How should you act during a negotiation?
Friendly, serious, confident? The safest would be
all three.
„ Should you counter-offer and if so by how much?
This varies from property to property, agent to
agent, and more importantly it depends on the
vendor’s reason for selling.
„ How long between counter bids should you wait
before calling the agent back? We would suggest
neither too long nor too short a time – not days,
not minutes. Once again, this depends on the
situation, but never sound or act like you must
have the property.
„ How do you get the upper hand? The more you
start to understand the vendors and real estate
agent’s motives for selling, the more you can
tailor your negotiations to your advantage.
„ What if they haven’t contacted you in a day or
two? Call them to ask how it is going. Once again,
don’t sound keen; you’re just ‘touching base’, very
casual – “How’s it coming along?”
„ How long should the process take – days, weeks?
This depends on the current market: in a hot
market like what we’re seeing now, a new listing
on a Monday at 9:30am could be gone by lunch;
in a slow market, it could take weeks.
If you’re serious about negotiating quickly on a property,
KDYHWKHFRQWUDFWIXOO\ÀOOHGRXWSRVWGXHGLOLJHQFHZLWK\RXU
solicitor) and your deposit cheque ready as the negotiation
is drawing to a conclusion, and use these as your tools to
show you are serious. Saying you’re serious is totally different
to showing you’re serious! Showing you’re serious has got
some clients property at $20–30k less than other offers, as
the selling price is not always the vendor’s main reason for
selling; sometimes it can be time and urgency they require.
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Quick tips for navigating
auctions
Try to speak to other potential buyers on the
day of the auction and ask them how much
they think the property will sell for. Most of the
time, people will quote their buying capacity
unknowingly, which means you can suss out
your competition. This is sometimes hard to
pull off casually and takes some courage to
do. Alternatively, you could walk around the
pre-inspection and listen intently to people
talking around you.
Place yourself in a position where you can
address the entire crowd and project your
voice when bidding.
Refrain from making any bids on the day of
the auction if no other bids are made, until the
last minute, and aim to be the first and only
bidder. This allows you to negotiate after the
auction session with the vendor’s selling agent
(no doubt the vendor will be worried about
the property not selling at the auction and
may be likely to move).
Bid confidently – deliver your bid in a loud,
clear voice and for the full amount. Your
quick and understandable bid might put your
competitors off psychologically, making them
believe they should back down because you
are nowhere near your limit and have endless
amounts of money, shown by virtue of your
confidence.
Don’t generally be the first bidder. Let
everyone else show their cards.
Don’t take much notice of agents coming up
and befriending you throughout the process,
saying it’s your dream home or investment
and it’1s only $1,000 more. Remember they
are paid by the vendor and by law have to
represent the vendor, not you.
STRATEGY | BEGINNER’S GUIDE TO INVESTING
STEP 6 Securing the property
Once you have had your offer accepted, it is important to
exchange contracts and set a time limit for return of the
contracts (usually by close of business that day). This will put
the pressure of loss back on the vendor and their agent.
2QFH\RXKDYHKDG\RXUÀQDQFHXQFRQGLWLRQDOO\DSSURYHG
by the bank, the exchange has occurred and you have a
settlement date set in stone, book in with the selling agent for
a time to conduct a pre-settlement inspection. This inspection
will give you the opportunity to make sure you’re getting the
same property and the internals that were part of the sale you
signed the contract for.
7KLVPD\VRXQGIXQQ\EXWVRPHWLPHVÀWWLQJVDQGÀ[WXUHV
– part of what you bought legally – are removed by the owner
after the exchange of contracts and before you settle on the
property. So make sure you have taken photos of the property
before you exchange contracts, and compare these with the
condition of the property at the pre-settlement inspection and
with your sale contract and inventory agreed.
The only thing left now is to wait for settlement day and
get your keys.
Seeking advice and assistance
If you’re feeling overwhelmed at this point, take heart.
It’s normDODQG\RX·UHQRWDORQH,I\RX·UHQRWWRRFRQÀGHQW
about your ability to do all of this on your own or you simply
want to minimise things that could go wrong, there is another
way: enlist a reputable and stringently vetted buyer’s agent or
an advisor.
It is well worth having a good advisor, agrees Intuitive
Finance managing director Andrew Mirams. He believes
WKDWEHJLQQHULQYHVWRUVFDQVLJQLÀFDQWO\UHGXFHWKHLUULVNVE\
seeking reputable professional advice and trusting it, but he says
people are often decidedly wary of getting professional advice.
“It might cost a bit for a professional, but it will ensure you
get your purchasing decisions right, initially and further down
the track. If you try to do it by yourself you are likely to end up
paying more in the long run,” he says.
Beginner investors can also learn many of the skill sets and
data sources that buyers’ agents use over the course of several
property acquisitions. This will make it easier for you to do it
yourself in the future and avoid buyers’ agents’ fees in the process.
Buyers’ agents: the lowdown
If you’re thinking of using a buyer’s agent, there are a few
things you need to be aware of. While there are many
advantages of enlisting one, there are also some downsides.
The key is to carefully vet whoever you’re hiring to make sure
you’re getting the best and right advice.
THE PROS
Propertybuyer.com CEO Rich Harvey says that, along with
helping with investment strategy and selection criteria design,
a good buyer’s agent can:
„ Save you time: They know where to look and can shortlist
AUGUST 2014
yourinvestmentpropertymag.com.au 37
STRATEGY | BEGINNER’S GUIDE TO INVESTING
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„ Save you cash: TKH\NQRZKRZPXFKWRSD\DQGFDQ
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„ Seal the deal: TKH\DUHZHOOYHUVHGLQQHJRWLDWLQJRQ
\Rur behalI
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THE CONS
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FDUHIXORIZKHQZRUNLQJZLWKDQDJent:
„ Vested interests: SRPHDJHQWVWRXWGHDOVWKDWLQYROYH
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LQYHVWRU
„ Information provided: Some agents give investors
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EHOLHYHULQEXLOGLQJZLVGRPDQGSHUVRQDOXSVNLOOLQJEXW
ZDUQVWKDWHYHQDIWHUGRLQJVRWKHUHDUHVWLOOULVNVIRUWKH
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THE COSTS
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ZLOOQHJRWLDWHDVHWRUÀ[HGIHHLQDGYDQFH0DQ\DJHQWVWKDW
Your Investment PropertyFRQWDFWHGFKDUJHDIHHRIDQG
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How to get the most
from an agent
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RSHQPLQGRQWKHSDUWRIWKHLQYHVWRUDUHNH\WRDVXFFHVVIXO
SDUWQHUVKLSZLWKDQDJHQW
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DQGKDYHGRQH\RXUGXHGLOLJHQFHDQG\RXVKRXOGUHTXHVW
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38
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Top tips for choosing a good
buyer’s agent
„ Establish an agent’s independence: find
out if an agent takes sales commissions for
agents or developers. If they do, they are not
independent or unbiased.
„ Investigate an agent’s track record: do
they abide by a code of ethics? Have they
received external recognition for their work
(ie awards)?
„ Look into an agent’s credentials: are they a
member of REBBAA, PIPA and the relevant
state institute? What qualifications do
they have?
„ Get testimonials and references to find out
what sort of service an agent provides and
the type of results they can deliver.
„ Determine whether the agent has
good research capacity and access to
comprehensive data sources.
„ Find out whether the agent has a valuer on
their staff.
„ Identify whether the agent walks the talk,
ie are they an investor themselves?
,I\RXSD\DWWHQWLRQWRWKHZRUNRI\RXUDJHQW\RXFDQ
OHDUQDORWDERXWSURSHUW\LQYHVWPHQWDQGWKHVWUDWHJLHV
WHFKQLTXHVDQGUHVHDUFKLWLQYROYHV
STRATEGY | BEGINNER’S GUIDE TO INVESTING
Top tips for doing research
Local council websites have a
wealth of free suburb information.
This includes zoning, planning and
development information. They
also often feature demographic
profiles and social breakdowns of
particular areas.
Infrastructure Australia has
information on significant
infrastructure projects and
developments.
Walk scores, from Walkscore.com,
can be good differentiators between
similar suburbs with similar statistics.
A walk score can show which suburb
is actually the most liveable.
Articles and hotspots are regularly
featured on websites such as
yourinvestmentpropertymag.com.au
– make it your regular stop.
Use Google Earth to create your own
detailed suburb map featuring all the
property titles in the suburb, street
by street. Then, using a postcode
sales history, write down the prices of
all of the properties that have sold by
title over the last few years. This will
demonstrate what you should expect
from each street in that suburb.
Take to your feet: on-the-ground
research will provide evidence
of what a suburb has to offer,
particularly in terms of the amenities,
services and lifestyle options
available to residents.
AUGUST 2014
yourinvestmentpropertymag.com.au 39
STRATEGY | BEGINNER’S GUIDE TO INVESTING
Sneaky tactics buyers’ agents use on unsuspecting buyers
By simple definition, to be a buyer’s agent you must
be paid by the buyer. If they are not being paid by
you, they are working for someone else, according to
Propell Valuers.
Dimitri Stephanos, certified valuer and property
acquisition specialist at Propell Valuers, lists the
following warning signs:
Buyers’ agents who have ‘stock lists’
should always be asked whether they
receive a kickback or work directly
with the developers. If they do, there is
a conflict of interest and they are not
really acting for the buyer.
Buyers’ agents who purchase a property
may then recommend further services
to their client, for example a property
manager. You need to know whether
the buyer’s agent receives any form of
kickback from this referral that may have
a real influence on their independence.
Be wary of buyers’ agents who say they
do research but cannot support that
with any independently researched
material or quality references.
So how can you spot them? Stephanos says there
are three ways to discover these dodgy tactics:
In the Queensland residential contract
process we have a PAMD Form 27c.
PAMD Form 27c is the selling
agent’s disclosure to the buyer
(Queensland-specific form), which
discloses any relationships the selling
agent has with any persons they refer
you to. More specifically, Part 3 of this
form refers to any amounts payable in
terms of referrals.
They predetermine investment
‘hotspots’ and it’s mostly off-the-plan or
house and land packages.
40
AUGUST 2014
yourinvestmentpropertymag.com.au
How can buyers protect themselves?
1. A buyer can always seek an
independent valuation to make sure
the purchase price is in line with
other recent market transactions.
Furthermore, a valuer should
hopefully be able to comment on
matters such as hidden commissions,
marketing fees payable, etc.
2. Knowledge is power. The more
questions/queries you ask of your
buyer’s agent, the more informed a
buyer will be. For example:
a. Does the buyer’s agent work with
developers or have stock lists?
b. Does the buyer’s agent receive any
kickbacks from property managers,
building and pest inspectors,
solicitors, developers, or builders
for referring their services or
products?
c. Ask the buyer’s agent to provide
recent examples of properties
sourced for clients that are relevant
to what the buyers are looking to
acquire.
d. Aks the buyer’s agent to provide at
least three client referrals that are
no less than six months old, with
contact details.
STRATEGY | BEGINNER’S GUIDE TO INVESTING
Questions that will help
4 you
vet your buyer’s agent
If you are looking for a property advisor or a
buyer’s agent/advocate to purchase a property
for you, there are four very important questions
you should be asking:
If the company can’t answer your questions and provide
evidence to back up their answers, you should not proceed
with them as they are unlikely to be experts in the area.
Finally, the answers to the four questions given here
(see box) will assist you in understanding whether the
company you are engaging is working for you, and whether
their recommendations are based on intimate local market
knowledge or knowledge gained online or from interstate.
1. Does the company have an office in the
state/area they are recommending?
2. Is the agent’s company licensed in the state they
are recommending that you purchase property
in? (Request evidence of this.)
3. What is their fee and is this paid by you as
the client?
4. Does the agent have any properties
available at the moment or will they
search for a property that is specific
to your needs?
AUGUST 2014
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