house property estimate

before buying an investment property froma property adviser, a property mentor or a property marketer, it's extremely importantthat you go ahead and do your research. in this video, i'm going to share with you7 things that you should do before buying property from a property adviser. this isespecially important if property adviser is offering you their services for "free". i'llexplain in more detail how they can go about offering those free services. but it is veryimportant that you do your research because a lot of these properties are overpriced andyou can get stuck with a property that is overpriced and that won't rent for what youwere promised. before i get into the specific research techniques,i first want to explain how these free services

actually work. what happens is, there's alot of developers out there who have house and land packages or units or what they call"property stock" - they call it "stock" in the industry - that they need to sell andthey need to get rid of. and often it's very difficult for them to sell this stock andso they need some help doing it. generally, a normal real estate agent has trouble sellingthis so they enlist the help of property advisers, property marketers, property mentors to dothis. and generally, property advisers are gettinga large commission on the sale of that property. like a real estate agent gets a commissionbut this commission tends to be a lot higher than a real estate agent. where a real estatemight be 1-2%, a property marketer's commission

might be anywhere from 6-10%. it is very discretionaryand it does depend. the lowest commission that it's ever going to be is about $5,000but that's very rare. generally, we see commissions around the $20,000 to $40,000 or higher range.so there are very large commissions going into this deal. and so even though they offer, they say theirservices are for "free", what is happening is they are getting paid by the developers.so they're incentivised to sell this property stock to people because they only get paidwhen they sell stock. and they only have a select list of items that they're actuallygoing to get a commission on. and that's with the developers that they're working with.generally, there's developer aggregates; so

they bring together all these different developers.you then get - as a marketer - you get a stock list. and so i've been provided these, here'sa stock list of the properties that we have and that you can sell. and so, as a propertyadvisor offering free services, you have this list of properties you can sell. you thenget customers in, offer your free services, and then you try and sell them one of thoseproperties. so that's how it generally works. it willvary depending on the particular property advisor, mentor or marketer that you're workingwith but that's kind of a broad overview of generally how it works in the industry. another thing that you need to know when you'regoing into this is that the capital growth

reports sometimes they come from reputablesources like rp data and stuff like that. but the pretty reports, they way that theyhave been done are generally provided to the marketers by the development companies. soyou can see the conflict of interest there; the developer is providing marketing materialsaying how good this area is they're then providing that to you. there is a conflictof interest there in terms of the reports that you get. so always take those reportswith a grain of salt. another thing i want you to keep in mind throughoutthis video; is just because an area is a good area to invest in, doesn't mean that the propertythat's provided for you is a good property to invest in. if you're investing in an areathat is growing but you're paying $40,000

more or $50,000 more for property than whatit's actually worth, it's going to take you years and years for the market to actuallycatch up with what your property is worth. so just because an area is growing; they provideyou with reports that say this area is growing and going up in value, that doesn't mean thatthe property they're giving you is going to be a good investment and move you towardsyour financial goals. that's something to keep in mind throughoutthis video and as we talk about this stuff, just know that just because the area is goingup in value and has all the right signs, doesn't mean that the property isn't overpriced, doesn'tmean that the property is a good deal. now, i'm going to go into the 7 things youshould do before buying property from a property

advisor. and the reason that i recommend thatyou do this - look, not all deals out there are bad but there are a lot of bad deals outthere. there are a lot of properties that people are buying that are overpriced andi have multiple friends who have actually gone through this process. purchased propertiesthat were completely overpriced; we're talking $30,000, $40,000, $50,000 overpriced and 5years later, the property still isn't worth what they paid for it. and they need to holdthat property because if they sell it, they're going to take a loss. so before you go intothis, it's important that you do your research. the first thing that you should do when you'reworking with a property advisor is find out exactly how much commission they are getting.they generally make commission in a couple

of different ways. the main way is throughthe developer like i discussed. the other ways are through their mortgage broking services;so they'll make a commission on the mortgage broking fee and also through insurances andsometimes through the setup of self-managed super funds if you're going down that route.but the biggest commission is going to be from the developer. now, to find out how much commission you'regetting. it's actually not as easy as you would hope. generally when you ask a propertyadvisor, how much commission are you making on this deal? they'll throw out somethingquite arbitrary, oh, we make similar commission to what a real estate agent makes; oh, youknow, it's not that much. it's just a fee

for our services. but it's very importantthat you find out exactly what this figure is. because this figure is generally a significantamount of money. and generally, i'm not actually 100% sure if they need to disclose that figureto you but i'm pretty sure that they will need to disclose it some way. it's going tobe hidden in the fine print somewhere. but before you go ahead, it's important that youunderstand how much are they making out of this deal and are you comfortable doing that? to give you an idea, a buyer's agent - whichis someone that you would pay out of your own pocket to help you find a property - theygenerally charge between about 1% to 3%. and so you're looking at about $5,000 to $15,000or $20,000 for a buyer's agent. and that's

someone with no conflicts of interest, generally.not always but generally because they're getting paid by you and working for you and generallyit's to buy existing property which these developer cuts and developer commissions,they're not available in existing properties. so, to give you an idea, you're looking atthe $5,000 to $15,000 range for a buyer's agent. so to find out what commission yourproperty advisor is getting, you can then compare that to a buyer's agent and you cansay, well, really, this service isn't free. they are getting paid this amount of moneyand am i comfortable with them receiving this amount of money for the deal and for the servicethat i'm getting? so that's the first thing. and look, if theydon't tell you how much commission that they're

getting and they're too scared to tell you,that should be a big red flag for you. if they're too scared to say, look, we're making$22,000 off this or we're making $30,000 or $40,000 from this and we make it in theseways. if they're not comfortable to tell you that, then you should be worried. you shouldlook into that in more detail and don't just take their airy-fairy response that, oh, yeah,just a service [inaudible 7:29] fees or similar to a real estate agent; because you need toknow. that is my number one tip and that's the easiest way to find out what you're actuallygetting and what they're actually receiving. i think that's very important. the second thing to do is find out if theyoffer rental guarantees on their property.

now, a lot of the market rental guaranteesis a way to get people through the door. you're investing in property, it's a big risk, you'reputting a lot of money into it. a rental guarantee on the outset looks like a great idea becauseyou're getting a guarantee that the rental income is going to come in. now, these rentalguarantees usually last for 1 to 2 years. and then what happens, it's been well-documentedthat this is kind of a scheme in the industry that they offer these rental guarantees tobe able to sell the property at a higher price. they then rent out the property and then whateverthe deficit is between what they can actually rent it for and what the rental guaranteeis, they pay that out and then after 2 years they disappear and you're left with the property.generally, what happens, if you see them offering

rental guarantees, immediately, that is ared flag. if a property is well-priced for the marketand it's going to be rented for the price they're advertised, you shouldn't need tooffer a rental guarantee. if you're investing in sydney, you're going to know that thereis high demand for those sorts of properties. you're going to know that the vacancy rateis really low and so in terms of rental guarantees, you really shouldn't need that. and if yousee it, it's a red flag. i'm going to talk about more about the research you can do aroundthe value of the property but also the rental value in one of the next steps. but, yes,if you see a rental guarantee, be red-flagged. consider that a warning sign and look intothat in extreme detail if you see that. because

that rental guarantee is being paid by someoneand it's generally being paid by you. and it's added to the purchase price of the property.even though it's not "technically" added to the purchase price of the property, that moneyhas to come from somewhere. okay, third thing is to look for similar existingproperties in the area. one thing that these property marketers and these property advisors,the reason that they exist is there's a lot of people who want to invest in property butthey don't actually want to go to all the effort of understanding an area and knowingwhich area is good to invest. so they rely on these advisors to help them. but one ofthe things that you should do - because as we discussed earlier, these reports are oftenprovided by the developers; which is a big

conflict of interest. so you actually wantto look at; well, what is going to be the purchase price of this house and land packageor unit? or whatever it is that you're buying. what's going to be the end price that youend up paying? well, now, go on realestate.com.au or go todomain.com.au and look in the area that you're purchasing and try and find properties thatare similar to the one that you will end up with. you want to find out how much are theseproperties worth and you want to find out whether that is similar to the property thatyou're going to be getting. is your property a lot more expensive than ones that you canbuy and what's the difference in those types of properties? so go in to the area and ifit's a 4-bedroom, 2-bathroom house with a

double garage or a single garage that you'reinvesting in in an area, well there's going to be some of those in the area already. sogo on realestate.com.au, find out how much those properties are selling for; compareit to the package that you're getting and see if there's a difference there. another thing to do is the same but in therental market. so if you're getting a rental guarantee on this property or you're gettinga rental estimate provided for you on this property, go on to realestate.com.au, lookat the rent section and find similar properties and find out what they're asking in termsof rental price. you know, with the purchase price of a property,it can be difficult because some areas like

syndey are very hot and things are going forway beyond what they're marketed for and then other areas aren't as hot and are probablyas marketed for a price and actually ends up going for a discount. so, the purchaseprice can be a little bit difficult but you can find out pretty roughly what a property'sgoing to be like. but in the rental market, that negotiation really takes place. so whatevera property is advertised for, it's generally what it's going to be rented for. this isa good way to understand how does the rent compare to what they've told me. so this isall about doing your own research and understanding what is on offer, what are they offering you?and how does that compare to if you actually went to the market yourself and just purchaseda property in the same area.

so if they give me all these reports sayingthis area is a great area to invest in and you understand that and you think, okay, that'sgreat. i want to invest in that area. well now, you need to consider your options betweenshould i buy a package from the property advisor or could i just go out there and buy an existingproperty? what's going to be better value? that's what you want to understand. becauseif you decide the area's good, you want to buy the best property for that area for thebest price. the next thing that you should do is get advisefrom a local real estate agent. local real estate agents know the area better than anyoneelse. what generally happens is, people call up the real estate agents 3 or 4 or 5 yearslater and say, look, i'm looking at selling

this property and they're like, what did youpay for it? like you paid that for the property, you got stung by one of the developers orwhatever. they know what's happening in the area. they know how much people are payingfor these developments, they know how much properties are selling for. and so when youget your package from your property advisor, go to a third-party real estate agent that'sunrelated to the developer or to the advisor that you're working with and say, hey, look,i'm really interested in this area. i've been offered these sort of development things.what do you think about this? can you talk to me about the pricing of this property,when this property is built? if i want to rent it out or if i want to sell it, what'sit going to be worth to the rental market?

what's it going to be worth to the sales market? they know, if you develop a 4-bedroom, 2-bathroomhouse to these specs, they know what it's going to likely sell for. they know what it'sgoing to likely rent for. and so you can get that opinion from them; which is going tobe extremely useful. they could then also point you in the direction of properties inthe area that may be better deals. or they could say, look, this is a great deal. theproperty's going to be worth probably $30,000 more than what you paid for it, if you'relucky. they're going to give you that advise and they're going to give you that input. so it's very important to not just take whatthe property advisor is giving you at face

value. because the fact is, they generallydo have that conflict of interest. they're getting paid by the developers to sell stock.they're not getting paid by you, they're getting paid by the developers. and so to get a third-partyopinion and to understand, well, is this actually in my best interest, not just theirs? is veryimportant. the fifth thing that you should do is to googlethe heck out of the company that you're looking into. there's a lot of forums like propertyinvesting.comor somersoft.com. generally, people go on there and say, what do you think about thiscompany? and people would give you responses. so just go in to google and search for them.put in their name with "review"; put in their name with scam; put in their name just generallyor put in their name with the word "forum"

attached to it as well. so do a lot of googlingaround them and go in to these forums. if you can't find anything on google about thiscompany - maybe it's a new company or something like that - go into one of these forums. goin to propertyinvesting.com, go in to somersoft.com, s-o-m-e-r-s-o-f-t .com and ask in their. joinand then ask, look, i'm looking to invest with this particular company. has anyone heardof this company or what do you think about them? so first, google the heck out of them, tryand find some reviews out there. and if you can't find reviews, then join the forums andask yourself and get people to give you feedback. it's going to be vital feedback that willbe very important.

the sixth thing that you should do is talkto people who've invested with this company 5 years ago; 3 to 5 or more years ago. ifyou're talking to people who've just invested, they don't actually know what the value oftheir property is, they've gone through the buying experience and, yes, that's well andgood to know. but someone who's 3, 4, 5 or more years down the track, actually understandsthe value of their home more. the chance that they've re-valued their home is more likely.and you can see, well, have they actually achieved the growth that was promised to them?was the property overpriced? try and get in contact with these people. now, if you're going to ask the property advisorfor people that you can contact, they're generally

going to give you their best clients. look,i run a membership site. if someone wants to say, can i talk to someone about theirexperience? of course i'm going to point them in the direction of someone that loves myservice. if you can, find people on the internet who have purchased property with these peopleyears ago and find out their experiences. see if you can get in contact with them, seeif you can email them or find them on facebook or something like that and get in contactwith them. that's a good way to do it. that's a hard task to do, so i don't expect manypeople to do that. but if you are serious and you are curious, try and find those people. and the last thing that i recommend that youshould do is actually consider a buyers agent

instead of a property advisor. so someonewho offer their services for free has to be paid by someone, generally, it's the developerand i see that as a big conflict of interest. you may, you may not. that's up to you. with a buyer's agent, you're generally payingthem out of your own pocket. generally, a percentage of the purchase price or a setfee of about $5,000 to $15,000. but they're then working for you. they're getting paidby you and it's in their best interest to help you buy a good property because theywant you to come back and purchase more property. so they're going to work harder for you, they'regoing to do what's in your best interest. especially if they're purchasing existingproperty and don't get those developer kickbacks.

again, not all buyer's agents are the same.so, always go back to these steps and find out; are they getting a commission from thepurchase apart from what i'm paying for them? you want the answer to be "no". you want tobe paying them and you want them to receive no other commissions and that way, their sourceof revenue is just from you and they are, therefore, inclined to help you out and dothe best by you. so tip number seven would be to consider abuyer's agent instead of a free property advisor, property mentor or property marketer. so, i hope that this has given you an overviewof how this business works. there's a lot of people who have been stung by this. thereare some good deals out there. there are some

great deals out there, where you can get instantequity. they do exist. however, there's a lot of bad deals out there and i want to helpyou understand what's a good deal and what's a bad deal. and so these 7 steps should helpyou do that. step number 1 was to find out how much commissionthey are making and ensure that you're happy with that. step number 2 was to find out ifthey offer rental guarantees; and if they do, that's a big red flag. step number 3 wasto look at similar existing properties in the area; both in the for sale market andin the rental market to find out, with the price you're paying, how does that compareto what you could buy in the market right now? step number 4 was to get advise froma local real estate agent and to find out

what they think about the package that you'repurchasing; what it's going to be valued once it's finished; what's it going to rent for?get in contact with them because if you can find a good real estate agent, that's goingto help you out when you finally do get a property. because they can then help you rentthat property. step number 5 was to google the heck out of the company and if you can'tfind anything about them, join the forums and ask about them. step number 6 was to talkto people who've invested with this company over 5 years ago and find out what their experienceswere. and step number 7 is to consider paying a buyer's agent out of your own pocket; whichi know seems hard but they will work in your best interest.

and if you're interested, i'm going to createa printable checklist of these 7 things that you should do and you can check them out.just go to onproperty.com.au/282 and you can get a copy of this printable checklist overthere. again, that's onproperty.com.au/282 for episode 282. this is a printable checklist that you canuse to go through these 7 steps and to make sure that you've ticked everything everythingoff, make sure that you've done your research and make sure that the deal that you're buyingis a good deal. so i hope that this has helped you. 7 thingsto do before buying from a property advisor, a property mentor or a property marketer.

i'm ryan mclean from onproperty.com.au. ihope that this has helped.