Why I Sucked it Up and Paid for Professional Property Investment Advise
Everyone I know who has invested in property has horror stories to tell. They warn me “You can’t make money in property”. Problems ranged from having no growth or worse, ending up in negative equity, tenants maliciously damaging properties and never-ending, expensive maintenance issues. One unlucky investor was trying to offload the nightmare investment, and right as the open home started, police performed a drug raid on a neighbour’s house!
But I was intrigued by the contrast between these terrible experiences and the incredible growth reported in the Australian property market over the previous decade. Below is a graph from the Reserve Bank of Australia demonstrating house price growth over the long-term. The gradually widening gap between the Consumer Price Index (CPI) and house price suggest (as does widespread media coverage) that property has been a fabulous investment over the years.
If you are interested in why I chose to invest in property rather than just index funds, check out my take on whether to invest in property or shares.
The problem was, I didn’t know anyone who had “got right” in property. There are property advisers everywhere, adverts pop up every time I’m on line and I’m receiving constant emails and occasional cold calls from companies I have never heard of. I am starting to suspect I am the actual product on sale here!
The experience I’ve (and most of my specialist colleagues) had with financial professionals so far have demonstrated that they do not work to an ethical code comparable with what, as doctors, we would expect. The Royal Commission suggests that financial advisers have often not put the clients’ interests first.
I felt vulnerable and inexperienced approaching a financial professional. How on earth would I find someone I could trust?
I was introduced to “The Property Couch”. I have a 30 minute each way commute, it sounded up my street, so I started listening on the way to and from work. The Property Couch is free and very easy to listen to, but extremely educational. I planned to save a 20% deposit over three years, so I had plenty of time to educate myself.
As I listened to 100+ episodes, I began to understand why those horror stories had occurred. Poor capital growth and even negative equity, was relatively predictable in an off the plan house and land package. Especially so in a town with low, or a single source of employment.
Poor quality tenants who trash properties are largely predictable, and therefore avoidable, by selecting good quality properties that will attract great quality tenants, and by using professional screening and rental management. And buying a house in the cheapest street in town is probably not going to end well!
A common theme among the property investors I knew seemed to be a lack of time invested in learning about property investment. Also, the source of advice seemed to be an issue, with investors being “advised” to buy a property when in reality the “adviser” was a salesman making a commission, or following a friend’s hunch about the next property “hot spot”.
The hosts of the property couch run a property investment firm in Melbourne, but aim with the podcast to share free information to encourage investors to make more logical, informed choices.
Although I’m sure the podcast is great advertising for Empower Wealth’s services, there is definitely no hard sell and the hosts are happy for you to use the information to purchase without professional assistance if you want. I thought this was pretty awesome. I was working hard to save all the cash I could – I didn’t really want to lose a chunk of it in fees, and hoped to use all this valuable information to work it out myself. I consider myself reasonably smart and was keen to learn.
I listened to the property couch for around a year, as well as reading every relevant book and internet article I could find! I narrowed my search to Brisbane, and started buying Your investment property magazine.
I geeked it up, attempting to analyse data including historical suburb median value growth, rental vacancies, days on market, yield, percentage owned vs rental, household income trends and public transport links. I rather enjoyed constructing large and complex excel documents in an attempt to narrow down suburbs in a logical and strategic way, but that’s probably just me!
I felt a bit confused by contradicting data, and not really knowing how to weigh one factor against another, but eventually constructed a list of suburbs in Brisbane I thought looked promising.
Over the next six months, at every opportunity I would explore these suburbs on foot when I had time, to get a good feel of the area. For those of you not familiar with Brisbane, it is very hilly! And hot!! I bordered on heat stroke several times and had to call an uber to rescue me to the nearest air-conditioned shopping centre!
Even when I hired a car for my exploration, I was completely bewildered. One street would look great, well-kept cars, house proud occupants, but I’d walk around the corner to find boarded up windows and toys left to rot in the front yard.
You might have guessed by now; I do only work part-time! I don’t imagine many would have the time, patience or be downright odd enough to take on this ridiculous quest! I did enjoy checking out all the gorgeous Queenslander houses, though!
With the start of 2019 came the impending election, and labour were threatening to abolish negative gearing benefits for property investors, one of the factors differentiating this investment strategy to me above others.
There was a lot of doom and gloom around the effects this would have on property prices. Is it just me, or are the media always predicting the end of the world, and it (luckily!) never turns out that bad in the end? I suspected this was the case this time, still wanted to invest in property (possible at least in part due to the amount of effort invested so far AKA Sunk Cost bias), and I definitely wanted to get in before negative gearing was abolished.
I had managed to save more than 10% deposit plus costs at this time, so decided to go ahead with my purchase sooner than planned.
It was clear to me by now that my attempts at “research” were fairly hopeless! I was like a fourth year medical student on my first clinical placement (Or a patient who has been extensively googling their symptoms)– I had read all the books and knew a lot of the lingo, but had no idea how to synthesis the enormous amount of data to make anything resembling a sensible differential and management plan. At least I now knew what I didn’t know!
It took a while to come around to the idea, but I was going to pay for professional advice. I now had a company I had developed some trust in, and had a way forward. If I didn’t bite the bullet and accept professional help, I was going to be stuck in “Analysis Paralysis” forever. I was fearful of making a mistake, and damaging my family’s future.
I reached out to the Empower Wealth team, and started the process to become a property investor for the first time.
Did I come to regret investing in property? Check out my reflections after six months of being a property investor.
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