7 questions to help you qualify a property investment ‘expert’
When things are going well in the world of real estate, it seems that everyone wants to hang a shingle on their door proclaiming to be an expert on all thing’s property investment.
And the current relatively buoyant stage of the property cycle we find ourselves in is no exception.
This time ‘round, all manner of SMSF and financial ‘advisers’ have come spilling out of the proverbial woodwork.
Unfortunately, though, not all are what they seem to be.
I’ve found a number of ‘professionals’, who make the assertion that they offer ‘expert property investment advice’, are really just pedalling the latest off the plan apartment product.
And these real estate agents and property marketers are raking in nice hefty commissions every time one of their clients takes the bait.
What makes things worse is that the properties being sold to unsuspecting investors are sometimes sub-standard yet have hefty developer margins built in to an inflated purchase price.
So how do you qualify the true “expert” from the guy trying to make a fast buck?
How do you know when you’re being counselled with considered wisdom born from a personal experience of property investment, or you’re being cleverly conned by a wolf in sheep’s clothing?
Here are 7 questions you should always ask when determining whether you’re receiving advice or a clever sales pitch…
1. Who’s paying for it?
‘Follow the money and see where it leads,’ is a very wise strategy to employ when dealing with property.
Logically an independent buyers’ agent you pay a fee to, will be more likely to provide an impartial assessment of a property than the real estate agent being paid a commission by the vendor to sell it.
Of course, there’s nothing wrong with commissions as such, but you need to ask if your adviser is receiving any type of kickback to recommend a property and if so, how much and from whom?
Keep in mind that the commission they receive has to come from somewhere, and generally that’s out of the investor’s pocket at point of sale.
In other words, you’ll be paying an inflated market price for what may be an inferior asset, which is certainly not what any expert I know would recommend you do!
2. Where’s the data to back it up?
Tread carefully here, because some of the slicker ‘experts’ have perfected a sales pitch that comes with some impressive-looking data.
They’ll most likely produce rental yield and sales statistics that look valid and enticing.
But remember the old adage, if it appears too good to be true…well — you know the rest!
You want to see hard-cold facts and figures from reliable, independent sources — such as market analyst firms.
If the ‘expert’ becomes cagey when you start to query the numbers, it’s time to be wary.
3. Have they built their own profitable property investment portfolio?
Do they have personal experience with the strategies or investments they’re professing to be an ‘expert’ in?
Property investment requires an intimate understanding that can only be gained through riding the various peaks and troughs of a number of market cycles.
Studies suggest that to become an ‘expert’ at something takes at least 10,000 hours of practice.
If your adviser hasn’t built their own successful property investment portfolio and learned from some mistakes along the way, I’d be cautious about the approach they might suggest.
4. How qualified are they as industry professionals?
How much experience do they have in the property and/or investment sector?
How long have they been active in the industry?
Certainly, time alone does not an expert make.
I know of many people who’ve been in real estate for years, but never managed to succeed when it came to building their own investment portfolio.
However, if someone’s seemingly just rode in on the back of the latest upswing in the housing market, you have cause to be on guard and do a little more investigation into their background.
It can be helpful in this instance to request references from previous clients the ‘expert’ claims to have assisted in the past.
A true professional will not hesitate to put you in touch with people willing to vouch for their services.
You should also consider how qualified they are in the location they’re recommending you invest in.
Currently, as the Brisbane property market hots up, we’re seeing interstate buyer’s agents flying in and out of the Sunshine state buying up properties.
If you’ve been around property a while, you’d know that it takes on the ground local knowledge to know why some pockets of a particular suburb are more desirable than others and what type of properties local home buyers and tenants desire.
Can you really be an “expert” in the Brisbane (or any) property market if all you’ve done is the due diligence on the Internet, but haven’t really pounded the pavement?
5. What is motivating them?
If they’re offering you information based on years of personal and professional market experience, as a fee-paying client, then you’re likely to be on the right track.
But remember, if there’s any other type of financial incentive, be it disclosed or undisclosed, you really have to question whether the ‘adviser’ has your best interests at heart.
6. Do other ‘experts’ have similar opinions?
Knowing that other industry professionals concur with the information you’re being given can go a long way in providing peace of mind that you’ve found a trustworthy adviser.
If a number of commentaries seem to have opposed viewpoints to the ‘expert’ opinion you’re receiving, take this information to your adviser and really test their knowledge.
7. Is it relevant to you?
Always be sceptical of the ‘expert’ who launches into asset recommendations before sitting down with you and taking the time to work through your investment objectives and strategy.
Advisers who offer generic guidance and have no understanding of who you are as an investor should be avoided at all costs.
There’s no ‘one size fits all’ in the investment world.
A true expert will want to know…
- your financial circumstances
- your investment goals
- your risk tolerance
- past and future plans
They will use this information and more to work out the most appropriate approach for you to build a profitable property investment portfolio, with asset selection based entirely on your investor profile.
A final word
Investing in property requires a significant financial commitment and as such, should never be approached with anything but caution and a considered degree of research.
