In this exclusive Q&A, Smart Property Investment speaks to founder of The Investors Agency, Babak Haeri.
SPI: For our readers who aren’t aware, tell us about the origin of The Investors Agency and what it brings to the Australian market?
Babak Haeri: The Investors Agency originated after 10 years of investing on a personal level Australia-wide, during that time many friends and family members reached out to my wife and I. They were curious to know how we were able to do what we did. We were fortunate enough to be able to also assist them during that time.
I was in quite a unique position where I had two landscaping companies, which employ nine staff. This had allowed me to step away and essentially stop trading my time for money by the age of 30. Not trading my time for money is what I am most passionate about, this is also the reason I got into property quite young.
Having that spare time, and having that passion, I found myself researching property markets, property cycles, what drives prices up, what causes prices to fall and all the fundamentals and triggers associated with real estate literally eight hours a day. So it only made sense to start The Investors Agency. I had the time, had the passion and it was a no-brainer.
What The Investors Agency brings to the market is a data-focused buyer’s agency. We dive into population growth, infrastructure, supply to demand ratio, economic changes, days on market, auction clearance rates, percentage of renters to owner-occupiers, vacancy rates, rental yields, percentage of stock on market.
These triggers allow us to accurately predict what the market is going to do in the short term, medium term and long term. Where we buy and the strategy we create for our clients purely depends on what our client’s income is, what their goal is, what their age is and how fast they want to reach their goals along with their risk profile.
SPI: How has The Investors Agency grown since it was first established?
BH: One of the hardest things about starting a new business was thinking what my friends would think of me going all out on social media in a new business and having to talk about myself on a personal level. This made me quite uncomfortable. I’m quite shy, reserved and timid when not around my immediate friends and family.
I’m saying this to paint a picture of myself. I’m not a salesman and it’s not in my nature to be your typical buyer’s agent. So, if someone had told me that I would be signing up clients all over Australia over a 10-minute phone call, I would probably laugh in their face.
However, since I have started the business, I have done exactly that. Admittedly the first six months was quite difficult; I expected that. I’ve run businesses before. I’m well aware what’s required, especially a business in the real estate industry.
However, after the first six months, business really took off. We were signing up clients all around the country [and had] clients coming back for their second property within three to four months. They were able to do this due to the strategy we created for them and the loan structures we put together.
I am currently looking to hire someone on the admin side of things. When that position is secured with someone who is fully capable, I will be looking to take on two more buyer’s agents: one in the owner-occupied space on the northern beaches of Sydney and the other for the investment space, Australia-wide.
SPI: What is The Investors Agency’s core offering to investors and how has that changed over time?
BH: Our core offering is a full buyer’s agency service + a tailored strategy creation. We introduce our clients to mortgage brokers and solicitors, if required, we do everything from suburb selection based on what our clients’ needs are, inspections, due diligence, negotiations and introducing our clients to property managers we work closely with Australia-wide.
Our offerings have not changed over time; however, I do recommend my clients to be a little more proactive during downturns such as COVID.
On a personal level, I am a passive investor, I don’t usually purchase to renovate as I prefer to spend the money on acquiring another asset as opposed to renovating. However, pretty much everything I have purchased on a personal level does have future development potential. It’s not something I look to do in the short term. It’s something I would look to do after I have acquired all the assets required to get me to my end goal.
But during a downturn, I do recommend my clients to purchase properties that have value-add or development potential as this is a much better way to add equity to the portfolio during a downturn.
If we have a client who just wants one to two properties to hold on for 20 years and does not need to tap into the equity, then a simple, buy and hold 10km to a CBD is most suited to them. However, for most other investors, during these times, we’ll need to look for value-add opportunities.
SPI: What is The Investors Agency’s key point of difference in comparison to other businesses?
BH: There are many good buyer’s agents out there at the moment. There are also many not so good buyer’s agents out there.
I believe in order to pick the best buyer’s agent, first and foremost, you need to trust your buyer’s agent, you need to connect with your buyer’s agent [and] you need to feel comfortable with your buyer’s agent.
You are trusting them for the biggest purchase of your life, so you need to be 100 per cent sure they have your best interests at heart and don’t just want to flog off the first property that comes up. You need to ensure they are patient with you, whether it takes one week or six months to find the right property.
I think this is a common point of difference between myself and other buyer’s agents.
After this, I believe our point of difference is the obsession with data we have. In every property report I send my clients, I have noted:
When you look into all this data, your probability of success dramatically increases.
Finally, my last point of difference would have to be, right up until COVID I was the one that inspects every single property for my clients. When the borders open up, I will be the one to continue doing this.
Thankfully, being in the industry for over 10 years, I have contacts Australia-wide, so during the border lockdowns, I was able to continue doing business. However, I had organised others to do the inspections for me prior to organising a building and pest report regardless. Many buyer’s agents just outsource the process and inspections, which I believe is extremely risky.
SPI: Generally speaking, what are some of the major trends impacting Australian real estate at the moment?
BH: Obviously, the major trend at the moment is COVID-19. This has caused lending to tighten, supply to drop, and unemployment to skyrocket.
Contrary to popular belief, this is not uncharted territory.
We saw unemployment peak at 10 per cent and 11 per cent in the 1990s and 1980s recessions. Admittedly, a lever the government could pull back then was interest rates cuts. This time we cannot do that; however, there are many other levers the government can and will pull this time.
These levers include removing stamp duty and instead offering buyers a yearly tax.
Have a think about that: What type of impact do you think that would have on house prices when people can all of the sudden get into the property market with 4 per cent-7 per cent less cash?
Other levers they can and will pull are: larger first home owner grants, stimulus packages for new and off the plan developments, and packages such as the government buying up any over supply of new dwellings.
During previous downturns, what the Australian government has done is increase population. This will in turn stimulate the economy and put upward pressure on house prices and business growth. In comparison, what will happen is wages will stagnate as there will be a larger work force. This will only create a larger gap between the rich and the poor.
At the moment, we are quite lucky in Australia, we actually have a middle class. I predict the middle class to be much smaller after COVID-19. Taxes will increase, wages will stagnate, cost of living, rent, house prices and business growth will all skyrocket.
This is why I am so passionate about people creating two to three income streams and not relying on their nine-to-five.
It’s a really scary thought that 90 per cent of people are stuck at a job that they hate, working 9+ hours a day, five to six days a week, to get two to three weeks off a year, if they are lucky, and have to continue doing that till they are 70. If they are extremely lucky, their super has not shat itself, then they can have a modest retirement for the few remaining years. Sorry to sound morbid, but it’s essentially modern-day slavery.
SPI: What are some challenges investors are facing and how can The Investors Agency help?
BH: Obviously tightening of lending is one of the challenges buyers are facing at the moment and longer than normal times to get pre-approvals sorted. For those that can get finance, there is very little stock on the market at the moment, which is why it’s more important than ever to use a buyer’s agent that has the contacts, knows the agents, and can access stock that others can’t.
We have over 200 properties presented to us at the moment which are off market. When I say off market, I truly mean off market, not the “off-markets” that agents email everyone on their database.
We get access to these for a variety of reasons, whether it’s someone that wants to sell privately or whether it’s one that’s going on the market in one month and the agent knows we can connect them with a buyer, which saves them having to do inspections and open homes.
We also have access to every home owner’s contact details. This allows us to target a specific property whether it’s on or off market. This is most suited to our clients looking for a property for future development.
SPI: Conversely, what are some opportunities being presented to investors in the current climate?
BH: I know it’s a cliche and everyone reading this has probably heard it before: Warren Buffet’s famous quote.
“Be fearful when others are greedy and greedy when others are fearful.”
His entire career is based around buying assets in times of uncertainty with less competition at a discounted price. This is no different to property. The best investors are not buying when the market is “booming”. They are buying when 90 per cent of the population either cannot buy or are too scared to buy.
All the inquiries we have been getting since Easter long weekend are from experienced investors with several properties in their portfolio, not from mum-and-dad investors. So, my advice would be, first and foremost, have your savings buffers in place. We recommend three months minimum, ideally six months if possible. Then, if you have a secure job and you can borrow the money, then don’t miss this opportunity.
No one can time the market, I don’t know when the market will bottom out, but one thing I do know is in the last four recessions, we either saw house price increases, or we saw a 5-10 per cent drop in some areas, followed by double-digit growth the following years. So, while I cannot predict the bottom of the market, history tells us we may see 5-10 per cent drops followed by strong growth.
One thing I do know is when a vaccine is released, or stamp duty is abolished, that will be the bottom of the market. That’s when 90 per cent of buyers come back into the market. You will have record-low interest rates, ease of lending, demand outweighing supply, and when the borders open back up, you will see unemployment drop. Essentially, they are all the fundamentals for double-digit growth.
That is not a time I want to be getting into the market.
On a personal level, I am getting into several different markets now, because when all the dust settles, every man and their dog will be paying 10 per cent over market value due to FOMO.
SPI: Going forward, what are the primary goals you/The Investors Agency has for the next six to 12 months and how do you intend to achieve those goals?
BH: As I have mentioned, I am passionate about not trading my time for money, and I believe if you’re a business owner, you have to have staff otherwise you’re just an employee and a slave to your own business.
So, while I love what I do and I don’t think I will ever retire, I essentially want to build the business to a point where I can step away and work in the business because I want to, not because I have to.
To do that, I will have to take on some new staff, I am currently looking to take on an administrative staff position. After I have found the right fit, I will look to grow the business with several buyer’s agents.
I really want to expand in the owner-occupied space on the northern beaches of Sydney. Spending the last 20 years on the beaches, knowing most the agents, how they work and knowing the area like the back of my hand, I really feel I could add value to people in that space.
But my true passion is helping people escape the rat race. If they choose to do that through property, then I would love to assist with that.