INVESTING, SELLING OR BUYING, PUT SAFETY FIRST
by Neil Jenman
Reading Time: Apx 7 mins
If you plan to have anything to do with real estate in 2022, your first goal should be safety. The real estate world is a dangerous place. Most people who enter this world get ripped-off or emotionally traumatised. Or both.
This is not an exaggeration. If you think that telling you that most people get ripped-off in real estate is designed to scare you, that’s true. You need to be scared. You need to be careful.
In a world where the news is focused on our personal safety, let’s never forget our financial safety. Especially in the real estate world. There are many sharks in real estate but few shark nets.
Most people who venture into the real estate world do not focus on safety first – and that’s why so many lose money in so many ways. Many never realise just how much they lose.
Most home-sellers under-sell their homes while being conned into paying excessive costs, such as advertising rip-offs and massive commission which rarely stand up to objective scrutiny.
Most home-buyers find the process of buying a home one of the most emotionally frustrating events of their lives. They cannot believe the lies they are told, the misleading information they are fed and, worst of all, how no one cares about their feelings.
There are more tears shed by Australia’s home buyers than by the buyers of any other product.
But it’s the investment world where anybody who ventures away from ‘typical’ real estate is almost certain to be badly hurt.
If you are thinking of investing in 2022, look out, there’s an entire industry set up to convince you they are the experts. They will claim to find you the right property in the right place at the right time.
In most cases (about 99.9%), these claims are rubbish.
The only thing these property experts are experts at is in ripping off trusting Australians.
On the outskirts of the nation’s cities entire tracts of housing are built entirely for the sucker-investor industry.
Teams of tele-marketers find victims with lures such as “save tax” or “pay off your home faster” or “secure your retirement.”
They then sell these “leads” – like worms to fishermen – to investment companies who do deals with developers to sell shoddy homes in steamy outer suburbs for massively inflated prices.
Some investment experts are paid more than $100,000 (yes, read that again!) in commission to sell one property. To earn $50,000 in commission per investment home is about average.
Who pays for all this? It’s loaded on to the price.
People (they can’t be called “investors”) buy these properties thinking they have secured their future. Instead, they have ruined their future because the property can take 10 to 15 years to be worth even close to the price they paid.
And, of course, the poor suckers who buy these properties never know they have been ripped off until they sell – or until costs force them to bail out.
In the meantime, they are blissfully unaware they have been cheated. Many give glowing testimonials to the investment companies.
Look closely next time you see raving reviews about property investment companies and here’s what you will not see: No buyers bought from this company and re-sold later and made a profit.
In 2022, do NOT buy investment properties from so-called investment companies. Go to local agents – yes real estate agents – in the same area. Check out the prices. You’ll find you can buy a similar property for between one and two hundred thousand dollars less than you are being asked to pay with the investment company.
Although real estate agents are distrusted by 95 per cent of the population, agents are veritable angels compared with the property investment devils. Stick with agents.
THE BEST INVESTMENT
The best real estate investment most Australians make is their family home. They didn’t need the advice of an investment expert to buy their family home.
So, just buy another family home.
Family homes are not just generally great investments, they are the best investments.
Just ask anyone who owns a family home in a major Australian city. Most wish they had bought two. Indeed, what’s the point of a property boom if it affects every other home in your area?
Unless you sell your family home in Sydney for a couple of million and move to Gulargambone and buy a home for $99,000, how does a property boom help any of us?
So, if you can’t afford to buy another family home in your preferred area, the solution is obvious: Find an area where you can still afford to buy a family home as an investment.
The property boom is like a ripple, it spreads from one area to other areas. Just look at Brisbane – and other regional centres in Queensland and parts of Australia. And get good information. Such as Margaret Lomas’s book called ‘20 Must Ask Questions for Every Property Investor’.
Please remember this: Yields are a great indicator of the ‘true’ value of a property. In Sydney now, investors accept yields as low as 1.5 per cent. You can still buy lovely homes in regional centres with yields over 5 per cent. Some at 10 per cent or more.
But when you compare yields, a $500,000 home in a regional centre with 5 per cent return, would be selling for $1.3 million in Sydney. What does that mean? The regional centre prices should climb? The city prices may stall or fall? Be careful.
The safety signals are all there – if we look for them.
Put safety first.
POPULATION AND PROPERTY
As of this week – up to Christmas Eve, 2021 – there are 25,933,724 Australians (based on Worldometer elaboration from UN data).
And every Australian is involved in real estate – in some way. We are either owning it, buying it, renting it, or finding some way to live in it.
We all live on this one big piece of real estate called Australia, that, ironically, has about the same number of acres (25.5 million) as it does people.
There are about 65,000 salespeople encouraging us to sell real estate, buy real estate, invest in real estate, or do anything with real estate that creates a good earn for them.
If we are thinking of selling, agents tell us it’s a great time to sell. If we want to buy, they tell us there has never been a better time. Both claims can’t be true at the same time in the same area. No, the only fact you can count as being a permanent truth is this: It’s always a good time for an agent to earn a commission.
According to Core Logic, there were close to 600,000 homes (and apartments) sold in Australia up to the start of September this year (2021). As we head into 2022, there are more than 11,000 homes being sold every week.
And most homes are under-sold. Most owners are losing tens of thousands of dollars.
Because home-sellers put too much focus on two factors: The amount of commission the agents quote them and the price the agent quotes them for the sale of their home.
Commission is not the biggest cost of selling a home. The biggest cost is the amount by which homes are short-sold.
In 2022, a well-overdue book, The Real Estate Short-Sell will be published. It’s written by Jim Grigoriou, a Melbourne agent with 40 years experience. In this book, Jim makes it clear that “the cheapest agent puts the most money in the sellers’ pockets.”
Don’t be tempted by a low commission quote and a big price quote. Agents who give their own money away don’t usually look after your money.
The two greatest secrets to staying safe when hiring any agent to sell a home are: First, do not pay any money for any reason until your home is sold. And second, unless you have a ‘get-out clause’, never sign-up for more than 30 days. Do not get yourself locked-in to an agent you don’t trust.
With the average commission per house sale now close to $20,000, these agents are hungry for your business. They know they have 64,999 competitors. They don’t want you to know that, however. No, they want you to think they are the only one who can do the best for you.
As a home-seller, you are a powerful person. Before you sign-up with an agent.
Once you sign-up, you are not so powerful. Indeed, most home-sellers are like hostages roped to a chair. The agent can do whatever they want and the sellers, all tied-up, can’t do anything.
So, set the conditions before you choose an agent.
If an agent won’t sell your home the way you want it sold – which is no costs until happily sold and a maximum 30-day agreement – find a different agent. Do not be bullied. Do not be pressured. Do not fall for the “this is the way it’s done” trick.
You are the boss, it’s your home. The agent must do what you say. If not, find another agent. There are 70,000 agents. They need you much more than you need them.
We are heading into more uncertain times in 2022. Nothing in real estate is more important that your safety.
If you need any help or support. With no obligation and no charge, please contact Jenman Support on firstname.lastname@example.org or call 1800 1800 18.
We will always place your interests first and we will always fight to keep you safe. Indeed, if we help you find an agent, we will insist that the agent agreed to give you 8 Protection Points. Before you agree to use the agent, the agent must agree to protect you.
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