Cheap can sometimes be expensive

Cheap can sometimes be expensive

By Scott McGeever | 27 June 2013

scott mcgeever tnWith so many Australians wanting to dive into property investment to build wealth and move towards a goal of financial freedom, the focus is firmly on value for money.

Blogger: Scott McGeever, managing partner, Property Searchers

That in itself is not necessarily a bad thing.  Everyone wants a ‘water cooler’ story they can tell their friends and work mates about the screaming deal they got on the latest investment property they bought!

What does concern me is that inexperienced people are making purchases recommended by ‘property consultants’ (to use the term loosely) who really either work for a developer or who work through a financial planner. Secondly, would-be investors are making purchases with no advice whatsoever and just hoping for the best that, through their small amount (inadequate) or large amount (confusing) of research, they have ‘hit the nail on the head’. More often than not in both these scenarios the person has miss-fired, bent the nail and the damage is done. Have you ever tried to straighten a nail after bending it!

Recently I had a couple (let’s say 50+) from Sydney come to see me. They had been told through their financial planner that a ‘property consultancy’ firm in Sydney was recommending some inner Brisbane developments, essentially to be bought in an Self Managed Super Fund (SMSF). I met with them during their visit to Brisbane and answered the 101 questions regarding the general market, how I saw the developments from a positional, style, size and quality point of view amongst other things. While there seemed to be nothing wrong with the developments on the face of it, the reality will essentially (in my opinion) prove to be very different.

The couple were focusing on achieving a rental and after tax return as high as they could. Don’t get me wrong, that is certainly a good thing. But when it comes at the expense of capital growth and the purchase of a good quality property, that is not necessarily a good thing. The underlying fundamentals were that the developments were very large (many units), in a busy location (great for tenants), and were primarily being sold to investors. Despite highlighting all of that and providing advice on where best to buy, in established areas close to but not on top of retail and commercial, they were still proceeding with buying not one, but in both of the developments!

My point is that while rental return is certainly an important factor to consider, it is not the only thing. The fundamentals of property are unlike shares when comparing.  Shares when bought and sold are done so with little or no emotion. Property on the other hand can evoke emotion, you can touch and feel it, it can be visually appealing or the complete opposite. Next time you buy, don’t get hung up on the initial rental return.  Look at the product, who it is being sold to, who will use it now and who is likely to use it in 10 years time.  Or I suppose you could just use a trusted advisor!


About Scott McGeever
scott mcgeeverScott founded Property Searchers in mid 2000 and it was set up to work as a buyer's agent servicing the needs of property buyers in Southeast Queensland and Northern New South Wales, assisting them in the search, evaluation and negotiation of property.

Scott is the founding Director of the company and since inception he has acted as a successful buyer’s representative, purchasing hundreds of properties in all market segments on behalf of local, interstate and overseas clients. The company has purchased many residential, commercial and industrial properties for owners and investors.

Scott is a pioneer of Buyer’s Agency in Queensland being one of the first agencies and the first registered property valuer to offer a full buyer’s agency service to the market place. Thus he has virtually written the book on buyer’s agency in Queensland. Property Searchers has grown from its starting point with two people part time to presently employing three full time staff, one part time and two consultants. The company has found a sound balance in being a market leader in the industry while still remaining a boutique agency and offering unparalleled customer service.

Scott's vast experience in the property industry since 1988 has seen him involved in varied fields including valuation, development and leasing. He is a registered property valuer in Queensland and New South Wales and a licensed real estate agent in Queensland and New South Wales.

A founding member and Chairman of the Buyer’s Agent Interest Group (Part of REIQ), Scott has also served as the President and Vice President of the Real Estate Buyers Agents Association (REBAA) and he has been the Queensland state representative of REBAA for 2012/2013. Through these appointments Scott plays an active role in promoting public awareness about buyer’s agency and lobbying Government for tightening of consumer protection laws and regulation of the industry.

Cheap can sometimes be expensive
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