Offering consistent returns and tangible bricks and mortar security, it’s not surprising that more Australian investors are choosing to add property to their retirement portfolio.
As an investor, you must ensure that any asset purchased meets your long-term financial objectives and more importantly, is feasible with regard to your capacity to derive the desired economic benefit.
But do beginning investors have as much ability to make savvy, wealth producing property acquisitions as the Donald Trumps of this world? Or should you seek expert guidance before jumping headlong into a property deal?
Qualifying property
Australia’s housing markets are in constant flux. Right now, while property values are increasing across some major city locations on an almost monthly basis, other areas are experiencing stagnant or declining prices.
Then there’s the question of what type of asset would best complement your property portfolio and ensure your continued success in building a viable post-work income.
A properly qualified, professional buyer’s agent can be an invaluable source of knowledge on any location you might be considering. They can help you qualify an area and property investment based on:
- The historical rate of growth and potential future capital gains.
- Specific streets that represent best value for money and buying opportunities for investors.
- Local tenant and owner-occupier demographics and what type of property is in constant market demand.
- Underlying drivers, including the strength and viability of the local economy and industry.
- Your personal investment strategy and objectives.
Importantly, buyers’ agents often have well-established relationships with local real estate agents and as such, may be able to access stock before it is advertised on the open market, giving you the potential to pip the buying competition at the post.
Seal the deal
When it comes to finalizing your property investment acquisition, the fee you pay a buyer’s agent can prove to be a very smart investment indeed. A buyer’s agent can:
- Save thousands when negotiating on your behalf, understanding how to parley effectively with other parties and accurately assess the maximum price you should pay for a property, without over-capitalising.
- Remove the emotion from the transaction to ensure you invest with your head, based on facts and figures, and not your heart.
- Stand in for you at auctions, using their knowledge of the process to help secure the property at the right price and again, ensure you don’t get caught up in the excitement of a bidding war and end up paying too much at the fall of the hammer.
What will it cost me?
So what sort of investment will you have to make to secure the assistance of a properly qualified and experienced buyer’s agent? While fees vary, depending on the level of service you engage your buyer’s agent to provide, generally the associated costs will be around 1.5 to 3% of the purchase price, plus GST.
If you engage a buyer’s agent for the sole purpose of negotiating a deal on your behalf, the charge is typically set at around 1% plus GST of the end purchase price.
Generally, a set fee of around $500 plus will be charged if you hire a buyer’s agent to literally ‘do your bidding’ at auction, with the potential for an additional commission arrangement should they successfully secure the property.
How do I qualify a buyer’s agent?
As with anything, not all buyers’ agents are created equal. Identifying a good buyer’s agent can obviously make all the difference to the success of your property investment endeavours. So how do you sort the chaff from the hay?
- Are they personally familiar with the property investment game? You want someone who has walked the talk, and has a personal interest in utilizing real estate to create their own extensive property portfolio.
- Are they qualified? Find out if they have the appropriate knowledge of the property industry and are properly equipped to offer advice on the housing market.
- What is their track record? Ask to see a history of their recent purchases on behalf of clients and seek out client testimonials.
- Are they familiar with the local area? You want someone who understands the intricacies of the market you’re looking at and the underlying drivers for housing in the area.
- Do they have the contacts required to find out about deals before they hit the market?
- Are they industry accredited and associated with a governing body such as the Real Estate Buyers Association of Australia (REBAA)? Do they practice according to a set standard of professional guidelines?
Perhaps the most important question you should ask to qualify a potential buyer’s agent is whether they are truly ‘independent’. If they accept any type of commission from real estate agents, vendors or developers, you should be sceptical as to their objectivity when suggesting a certain product. Likewise, be wary of a buyer’s agent who has his or her own product to sell!
About the Author
Since 2008, David Thomas has built a business aimed at servicing the needs of property investors, owner occupiers and small business owners. David is recognised as one of the top 10 independent mortgage brokerages in the country, David and his team have settled almost billions of dollars worth of residential and investment loans over the last decade.
Known for his straightforward, relatable style, David believes by educating people about property funding; they fare better in the market. By sharing his expertise openly, some of the people he educates will likely become his clients. It's a win-win approach.
David Thomas is a credit representative (Representative Number 506153) of BLSSA Pty Ltd, ACN 117 651 760 (Australian Credit Licence 391237).