A recent survey by the Property Investment Professionals of Australia (P.I.P.A) revealed the many and varied sources investors consult for advice, but since most property investors fail to achieve the financial freedom they deserve, and with less than 8% ever owning more than 2 properties, a better question to ask would be…Who should you ask for property investment advice? Michael Yardney helps with an answer to that question in the show.
Kevin: There’s a recent survey done by PIPA, the Property Investment Professionals of Australia. They asked the question about who do you ask for property advice? Well, with so many property investors not necessarily succeeding at their portfolio, maybe we should ask the question who should you ask for property investment advice? That’s the question I want to pose now to Michael Yardney from Metropole Property Strategists.
Good day, Michael.
Michael: Hello, Kevin. That’s a good question, because there are so many different people you can turn to. Sometimes, it’s confusing.
Kevin: I was going to say you’ll probably say, “Well, they should ask me.”
Michael: Well, yes, that’s a good point, isn’t it? They could, or somebody who’s a professional advisor. Maybe we could have a look at the various options of who they could ask, and we’ll end up with who they should ask. Would that be okay?
Kevin: Yes, fantastic. So, who?
Michael: One of the first places to start is what some people do is actually not ask anybody. They think they know a bit about property because they’ve lived in their house or they’ve rented before. That’s a big mistake, and probably one of the reason why – I don’t know – about 50% of people who buy their first investment sell up within the first five years.
Kevin: The next one no doubt is friends and family. That could be a bit of a mistake, couldn’t it?
Michael: I understand why you’d do that, but the question is are they really financial experts? How many millionaires do you have in your family? If not, don’t ask them, because you’re probably going to find their advice will be to avoid property investment because they’re going to think it’s risky.
Kevin: The point that I would make, too, is that most friends and families feel that they should try and talk you out of most things for fear of you making a mistake.
Michael, what about a real estate agent?
Michael: Remember, real estate agents work for the vendor. It’s their job to help the vendor – the seller – achieve the best price, so they’re unlikely to tell you about other good properties down the road that another agent has for sale. So no, I wouldn’t be asking a real estate agent advice, remembering that most don’t own investment properties themselves.
Kevin: What about mortgage brokers?
Michael: I know a lot of people do ask their mortgage broker for advice, and it is really important to have an investment savvy broker as part of your team. But that’s more to help you through the maze of finance, because most don’t understand the property market well enough to advise on what’s an investment-grade property.
Kevin: I guess an accountant is a good person to turn to, but are they the best for property investment advice, Michael?
Michael: Again, they’re meant to be part of your team – that’s important – but most accountants should stick to advising on tax matters and structuring, but leave the property side to other people.
In fact, I found a lot of accountants are aligned with developers and project marketers and end up getting reasonably high commissions for theoretically advising you but in fact, pointing you in a direction.
It’s much the same with financial planners. While they’re licensed to sell financial products, most aren’t able to advise on real estate, and those that do end up getting… Look, I got an e-mail only two days ago from a large developer suggesting they’d give me 9% commission on a development to recommend to our clients. Of course, we don’t do that.
Kevin: No. We’d have to put property marketers into this list, but you’d certainly never rely on their advice, I wouldn’t imagine.
Michael: The problem is that some property marketers seem like they’re salespeople working on your side when in fact they really are selling a product of a developer. That’s their job and they get paid by the developer to do it, so it’s not independent or unbiased.
Kevin: We get a lot of questions from people saying, “I’m going to an investment seminar or a workshop.” Is this a good area to get that type of independent advice?
Michael: I have to make a disclosure: I do those once a year, and you therefore have to ask yourself “Is the person who’s conducting the event an expert in their field? How long have they been financially secure? Or do they make their money out of teaching people rather than by doing it themselves?”
So, there are opportunities, but like with everything else, you have to choose your advisors, your mentors carefully.
Kevin: And I guess if you do go to one of those seminars or workshops, just be very careful if they’re actually promoting any real product on the day, as well.
Michael: Exactly. If they have a property to sign at the back of the room, then you should run away.
Kevin: And property mentors? They’re fairly new on the scene.
Michael: I have always – well, over the last 20 years or so – relied on mentors and coaches. I firmly believe in mentoring, and I’ve mentored over 2000 people, but currently there seems to be an abundance of property mentors around, some of whom actually give really great guidance while others are really property sellers or marketers in disguise.
So, I believe it’s important to have mentors because they see your blind spots, they give you guidance, they support you. Just make sure they’re a true mentor and not somebody selling property.
Kevin: Yes, because on this show, Michael, we talk to all of the people we’re talking about here, and they all have different levels of advice. Even buyer’s agents, as well. Are they worth talking to?
Michael: Of course, they are. They can be a great help in selecting the right property, but again, some of them are just what I’d call order takers. They don’t devise a plan that takes into account your own personal and your family’s future, your needs, your risks, your risk profile.
And most buyer’s agents are only good in their area. I’m not running them down and calling them order takers because they’re very good in that group of suburbs they’re familiar with, but they won’t know the other city or the other state.
In my mind, that’s why you need somebody who’s going to coordinate all those, and that’s a property strategist. I believe it’s critical to have a trusted advisor when making investment decisions. It’s just too hard to do it on your own. You can do it by trial and error, but there’s a huge learning fee involved in that – of time, of money, of effort, of heartache.
Kevin, I’ve actually found that most wealthy people have – and they’re actually prepared to pay for – trusted advisors in many areas of their life, while an average person has no advisors or they get their advice from salespeople who they believe are advisors but they are far from independent.
If you want to become wealthy, do what the wealthy people do: take a bit of advice.
Kevin: Help me here now, because just very quickly we’ve covered across a number of people: friends and family, real estate agents, mortgage brokers, accountants, financial planners, property marketers, investment seminars and workshops, property mentors, as well as buyer’s agents. You’ve mentioned there about property strategists. It’s no wonder people get confused.
How can we tell if we’re actually dealing with a trusted advisor?
Michael: Good question, Kevin. It is hard to tell, because they all come across meaning well. A trusted advisor in my mind tailors their recommendations to your personal circumstances and will also warn you about the risks as well as the rewards.
So, their advice isn’t biased to a property, to a product, to a service that they’re selling, or in fact to a specific state. Because if all they can advise you on is Brisbane or Perth or Darwin or Sydney or Melbourne even, it may be right today but it may not be in the long term.
One of the first questions you should ask is “How are you getting paid?” because this is actually going to reveal a lot. If you’re offering services for free, are they being paid by a third party like the developer or the seller? Their advice can’t be independent.
Your advisor should also be qualified. They should be a member of a recognized organization, maybe like PIPA that we discussed before. They should have a thorough understanding not just of property; they really have to be a holistic advisor understanding finance, economics, the tax system, at least in relation to how it relates to real estate.
The other big thing is your advisor should have no properties for sale but should have a number of investment options for you depending on your circumstances. The other thing is they shouldn’t be pushing you. There shouldn’t be a sense of urgency to it, Kevin.
Kevin: I guess the bottom line, Michael, is that there are just so many things that you can learn from financial media, books, seminars to really gain that good knowledge. You have to work with those trusted advisors and try to help them work you through all of that information.
Michael: Sure, because you can get knowledge from all those things you mentioned – the books, the seminars, the Internet – but what you can’t get from that is experience. And that’s what you’re paying for, Kevin. That takes years to acquire and it comes at a cost, but it actually minimizes your risks.
It’s just too difficult for beginners, and in today’s environment, even for more experienced investors to gain the perspective of what’s happening in our markets as they’re moving so fast. So, why not leverage an experienced professional advisor – a property strategist, one who’s independent?
In my experience, Kevin, professional advice is never expensive. On the other hand, most investors pay a huge learning fee to the market by buying the wrong property or in the wrong location or paying too much for it.
Kevin: Well said, Michael. Thanks again for your time. Michael Yardney from Metropole Property Strategists. Michael, your blog carries a lot of good information, as well.
Michael: PropertyUpdate.com.au. Thank you, Kevin.
Kevin: It’s a pleasure, mate. We’ll talk to you again soon. Thank you.