by Neil Jenman
Reading time: Apx 5 mins
When I see people offering advice on property investing, I get suspicious. What’s their true motive?
Do they want to sell me a course on investing? Which usually means paying thousands of dollars for information easily obtained from $20 books. Or free on the internet.
Or is their motive darker?
Are they one of those self-proclaimed “property experts” whose real skill is getting inexperienced investors to trust them. And then selling investors a property over-priced by hundreds of thousands of dollars.
Most of these people are thieves.
I don’t care what claims they make. I don’t care how long they’ve been in business. I don’t care what’s written on their on-line reviews, they are still thieves.
To me a thief – in the real estate world – is someone whose advice leads to them getting financially richer than they deserve while their clients become financially poorer than they should have been.
In short, what these so-called “experts” do is sell massively over-priced properties. It’s common for these thieves to sell a property for $750,000 that’s barely worth half that amount, maybe $400,000.
Just like auction agents, these investment thieves disguise their evil. Most investors don’t realise they have been ripped-off.
So, here’s how to protect yourself when someone offers you property investment advice.
If they are selling you a course – whether on-line or in a conference room – say no. Buy a book for around $30 by a true property investment adviser, someone ethical and competent, such as Margaret Lomas. She’s been around for years. Both her character and her competence are undoubted.
If someone is claiming to be a property investment expert, be more careful. The best thing you can do with such people is disconnect the call. Remember, no matter what they tell you, they are thieves.
One of their claims is that they “make it easy for you”.
Sure, easy for you to get ripped off. They will show you hundreds of reviews from people praising them about how “easy” they made the buying process. The reviews will often state how much this company “cared”.
Yes, cared about their massive profits, that’s all they cared about. And of course, they made it “easy”. The customers’ ignorance makes them so much easier to fleece.
In more than 50 years in the real estate industry, I have never seen an investor get a good deal when buying from a “property investment company”. Or from attending a property seminar.
These poor people – and it makes me sad to refer to them as “suckers” – often don’t discover they have been ripped off for years. They sleep soundly feeling they’ve got an excellent long-term property investment. They paid $750,000 today.
Now, all they have to do is sit back and wait. Just like that nice salesman said. Didn’t he tell us that what’s important is “time in the market not timing in the market”? Sure, another slick line that disguises how investors get ripped off.
The fact is this: If you pay $750,000 for a property worth $400,000, you’ll wait years longer than you should have done. Often it can take a decade for over-priced investment properties to be worth the price investors paid for them. And it’s not until they decide to sell that naïve investors realise how badly they have been stung.
The Golden Rule when buying investment properties is never buy from companies that claim to specialise in selling investment properties. They will almost certainly rip you off. Big time.
Oh sure, they present well. Oh sure, they say all the right things, all that you want to hear. Oh sure, they sound like experts. Oh sure, their web site is impressive. And then, yes, they have hundreds of on-line testimonials (which are either completely bogus or are from poor saps who don’t realise they have been ripped off).
No matter how good they look, no matter how appealing they may be, one hidden fact never changes: They are selling properties hundreds of thousands of dollars above their true value. In the process, of course, they are often pocketing around $100,000 commission on each sale. Sometimes more. I have seen a salesman pocket $300,000 for selling a property for $900,000 that was worth close to $500,000.
A RIP-OFF INDUSTRY
You may be surprised to learn this fact: All over Australia, thousands of new homes are constructed purely to sell to inexperienced investors. Row after row of identical (cookie-cutter) homes are slapped together on the outskirts of our major cities. All built for the ‘rip-off’ market.
Developers and their sales agents from slick investment advisory companies pocket hundreds of millions of dollars profit between them.
You must avoid these people.
YOUR PRECIOUS FAMILY HOME
Consider something: When an elderly person dies, what’s usually their greatest asset? It’s their lovely family home, right? It’s not some daggy rental property in a far-flung suburb. It’s not a scungy apartment on the Gold Coast.
The greatest asset you will likely ever possess in your life will be your family home. Nothing seems to beat the family home for capital appreciation and ease of re-sale.
And from whom do most people buy their family home?
From a real estate agent, of course.
Now, granted, real estate agents are not the most trustworthy people. But if they are not marrying into your family and provided you know how to handle them; they can’t hurt you too much – especially when buying an investment property.
STICK WITH REAL ESTATE AGENTS
If you want to invest in real estate, here’s a huge tip: Deal with real estate agents. Stay away from property investment companies.
That’s what the smart and experienced property investors do. Look at any auction and you’ll see nervous homebuyers hugging each other. And then, dotted amongst the crowd, you’ll see sharp investors. Usually standing alone, lips pursed, faces set in stone as they focus on one thing they often find at auctions – under-priced properties. Great investments for their future.
If, like so many buyers, you don’t like auctions, just go straight to the agents in your chosen area. If you are competing with other buyers of your ilk, you should be safe. Sure, most real estate agents rip-off sellers, but in two ways that don’t concern buyers, indeed, one benefits buyers. Those two ways are firstly, charging thousands of dollars for needless advertising and secondly by under-selling homes (due to their poor negotiation skills).
These are compelling reasons why you should always buy your investment property from agents. At worst, you will pay market value. At best – such as at many auctions – you will snatch a real bargain.
You can never get such good deals from so-called property experts.
Even buyers’ agents should be treated with caution, especially if they suggest you buy a property from a developer in a far-away location. In one case, a buyers’ agent sold an investor a property that belonged to the agent. The agent bought it on the general market. He then quadrupled (increased the price four times) and sold it to a trusting client. And get this, he slugged his client a $25,000 “finding fee” for sourcing the property. Yes, he found himself.
And please don’t laugh or feel contempt for people who seem to be ripped off through stupidity. Evil is very seductive and a lot of salespeople are great seducers.
When it comes to buying an investment property, think of your family home. Think how happy you feel living in it; how lucky you feel to have found it. Think how it has appreciated in value.
And then ask yourself this question: “Do I wish I had bought two family homes?”
Of course, yes.
So do the same again. If you can’t afford your own area, go to a less expensive area with established homes. Find a local agent and buy another family home in a pleasant suburb.
And then you can sit back and wait with confidence, knowing that, because you bought well, in the years ahead you will do well.
If you want added protection, you can hire a valuer. For a few hundred dollars, they will likely assure you that you bought well. After all, you stayed away from investment companies which can never be trusted. You chose a normal real estate agent and bought a family home in a normal suburb.
In such instances, you can trust that you should get a good deal.
So as hard as it may be for my cynical pen to write these words, here goes…
When it comes to investing, you can generally trust real estate agents.