Buying real estate can be confusing and intimidating. From finding the best property to making it through the buying process, it can get overwhelming. And this makes perfect sense because real estate is expensive and we need to be extra careful to ensure our investments will be profitable in the years to come.
As investors, we need someone who does not have a stake in the deal, who genuinely wants to help us to get the best deal and can help us along the path to monitoring our investments, rents, growth and taxes as well as any other challenges we have to face.
The Two Major Categories
Before you take the plunge, bear in mind that real estate purchase can be divided into two major categories :
- Buying your own home or investment from real estate agencies
- Buying your own home or a property investment from a consultant or strategist.
Now, which one of the two categories is more trustable?
This is a tricky question to answer. Here are three problems and how they add to the confusion for real estate buyers and investors.
The First Problem: Conflict Of Interest
Most real estate agents and advisors have vast interests in the deal. Their commissions are earned through the sales of the properties and as a result, they may not always serve you in your best interest.
These agents and advisors would typically use their sales techniques to pitch properties by telling you the things you would want to hear, and if you are not careful, their words may cloud your judgement.
On the other hand, there are professional real estate agents and advisors out there that will work hard for the client and serve them well. These agencies have no interest in the deal and are paid for their services. However, it is always important to know where they get their researches and statistics.
The Second Problem: There Is No Actual Research
Most of the data provided in the market are bias data and not related to the property the consultant wants to sell to you. Some of the data are even dodgy and advice is only given with the purpose to justify the property purchase.
The main issue here is most, if not all, of these data, are based on previous statistics, factors and superficial assumptions. These so-called proven success stories can be extremely misleading as they do not reflect the current situation and the actual value of the property.
Using the wrong investment approach can be highly risky. Investors need proper reports and good reports often come from an independent source that has no interest in the deal. A proper property risk report should reveal the real value and future growth of the property.
At Investinproperties, we can help you to get those risk reports. We have helped many people who were looking to buy a property, OTP and second hand from falling into property buying traps.
Having proper risk management and the right independent advice will put you in a good position, and you are likely to get a good return and improve your property portfolio.
The Third Problem – Vendor Profits Rather Than Investor Profits
In new developments, the developer is the one who makes most of the profits.
A good example is a new three bedroom, a two-level townhouse is sometimes more expensive than a single level house that sits on a 600m2 land. This difference represents a high equity risk as you are expected to pay much more on a lower-class product with a small area.
Having said that, there are good developers and builders out there that offer excellent OTP and house packages that associate with low equity and cash-flow risk. However, due to the oversupply of vendor sellers, they are not as easy to find. You need to do your homework and apply proper risk management.
As you see, buying real estate can become incredibly confusing and this remains true when you do not have sufficient knowledge and have to deal with those who do not serve your best interest.
To avoid the confusion and to know more about what you need to do, always do your research with independent advice and risk management. With proper risk advice, buying real estate can be a more joyful and rewarding process.
Additional advice:
- When you talk to a professional about property investment, never reserve or buy a property on the spot without proper risk management or independent advice that does not support the vendor or the deal.
- Ensure that the price is assessed with risk management percentages’ median.
- Avoid general comparison to other state, capital cities, different property size, asset-class or configuration. The comparison should only be about the particular property, its attributes and the suburb risk.
- For new developments, the developer is the first entity that earns the most profits. Investors will get a small piece of the cake in later stages, therefore it is extremely crucial to measure the risk and return to make sure you will make the right investment decision.
