7 Things To Do Before Buying From A Buyers Agent
Make sure you do these 7 things before buying property through a buyer’s agent to ensure you get a great buyer’s agent and a solid property investment
A buyer’s agent can be very helpful when it comes to purchasing investment property. They can help you purchase the right investment property for your financial goals. And they can even help you get a property that has instant equity. But there are some things that you should do before you buy property from a buyer’s agent. And that’s I want to talk about in today’s episode.
Hey, I’m Ryan McLean from onproperty.com.au. Helping you find positive cash flow property.
A buyer’s agent is someone who knows the property market better than you. And you pay them to go out and do the research for you to help select a property. And they also help negotiate with the real estate agent in order to get the best price for that property. They help you through every step of the way and they can be a great asset, especially for people who don’t know a lot about the property market or who don’t have a lot of time to go out there and do the research themselves. But, there are some things that you should do before you purchase property through a buyer’s agent.
The first thing that you should do is view their property portfolio. They should be able to share with you what their property portfolio looks like. How many properties do they have in there? What type of properties do they have in their portfolio? What is the income level of their portfolio? And are they positive cash flow or negatively [inaudible 1:21]? The reason this is important is because you want to align yourself with this buyer’s agent who is moving in the same direction as you or who’s already achieved what you want to achieve.
If you are very interested in positive cash flow property and you want to go down that path in order to achieve financial freedom, and you’re employing a buyer’s agent who has invested heavily in negative [inaudible 1:42] properties or capital growth or they’re doing developments. Well, their skill set is going to be different to what you need in order to achieve your financial goals. So, find a buyer’s agent who has a portfolio that looks like what you want yours to look like in the future and has already achieved that or is well on their way towards achieving that. This way you can ensure they have the right skills to go out and find the right properties to help you move towards your financial freedom. And if they’re not willing to share the details of their property portfolio with you, well that should be a red flag and a warning sign to you. Maybe they’re not the best buyer’s agent to align yourself with.
The second thing to do is to talk to past clients of theirs and to find out whether they had a good experience, what the property they bought was like, whether it got re-valued and was worth more or what the cash flow was like? Talk about the experience, what troubles did they have? You want to find some of their past clients and you want to be able to get on the phone with them and talk to them and understand what is the buying process like? What’s it like to work with this person? And what are some things that you should be aware of?
So, try and get access to at least 3 of their past clients to find out how they have been. But always take this with a grain of salt. Because, look, I run my own membership site and if someone came to me and said, look, I’m interested in joining your membership site but in order to join, I first want to talk to 3 clients who are already part of you membership site and see what they thought. Well, as a business owner, of course I’m going to send you 3 of my best clients who love my service and are going to talk highly about me. So, talk to these people but take it with a grain of salt.
The third thing that you should do is to Google this person or Google this company. A good buyer’s agent likely has some articles out there on the internet. They probably got their own website but there will also be reviews about them on forums like propertyinvesting.com or somersoft.com. So, Google them; so Google their name, Google their business name with the word “review” at the end. Google their business name with the word “scam” at the end. Just try and find out anything that people have said about them or try and find articles that they’ve written. And if you go through the articles that they’ve written or videos that they’ve created, you can try and get a feel for whether they know what they’re talking about. Whether they’re a sleazy sales person, whether they’re going to be a good buyer’s agent or not.
A great example of this is Kath from everydaypropertyinvesting.com. She’s got her own buyer’s agency called propertyzest.com.au and you might hear about Property Zest and think, oh, maybe I’ll go with them. But if you don’t know Kath, you can go to everydaypropertyinvesting.com, she’s got over 100 podcast episodes. You can listen to 100 podcast episodes about Kath, talking about her investment strategy, talking about a whole bunch of different things and you can understand, well, is this someone that I want to work with or not?
Or the buyer’s agent that I recommend, Ben from pumpedonproperty.com, you can go over to his site, pumpedonproperty.com and you can see the articles that he’s written. You can see the interviews that he’s done on my website. You can see the webinars that he does and you can get a feel for him, you can see what his portfolio’s like, you can see that he’s already positive cash flow and you can say, okay, well, is this someone that I want to align myself with and move towards financial freedom? Because he’s already achieved it, he knows what he’s talking about, okay, yeah, I’m comfortable with that.
So a good buyer’s agent should be out there. You should be able to find things about them and be able to learn about them. And if you want to get in contact with Ben, who’s the buyer’s agent that I recommend, go to pumpedonproperty.com and you can set yourself up with a free strategy session for him and if you let him know that you came from Onproperty then I will get a referral fee, just so you know. So, obviously, take that recommendation with a grain of salt as well. But I do highly recommend Ben.
The fourth thing to do is to find out how they are paid. Finding out how your buyer’s agent is paid is very important. And I’ve talked about this in length when I talk about these free property advisors or free buyer’s agents or free property mentors, who actually make a big commission from the developer on the new-build properties that they’re selling. Big conflict of interest tends to lead to these properties being overpriced. So you’re paying more than what they’re worth. So it’s very important that you find out how they’re being paid.
Ideally, a buyer’s agent should be paid by you and you alone. That means that you’re paying them cash. So you’re either paying them based on the percentage of the purchase price; usually it’s around 1-3% of the purchase price or they might have a fixed-free structure, like Ben from pumpedonproperty.com does. You want to find out how they’re paid. Are they just paid by you or are they getting commissions from somewhere else. If they’re getting commissions from a developer, then that’s something that you definitely want to look into in more detail. If those commissions are large, then that could lead to the property being overpriced.
And, look, we talked more about this in episode 282. So, you can go to onproperty.com.au/282 if you want to learn more about how these free services work and what you should do in order to be prepared for that. But, yeah, find out how they’re paid. Generally, they’ll be paid directly by you. They won’t get commissions from developers, although in some cases, they will. They might also get a referral fee if you use their mortgage broker. This is nothing to be worried about so I wouldn’t stress about this at all. Very common in the industry and it’s not going to lead to you paying more for your mortgage. And the last way might be through recommending some insurances and them getting a referral fee on insurances. But you want it to be they’re paid by you, ideally they don’t get big commissions from developers and then they might make some supplementary money from mortgage broker services or something like that.
You just want to make sure that there’s not a conflict in interest in the way that they get paid. If they’re getting paid to sell particular properties, well, they’re advise is going to be skewed towards those properties whether they’re good investments or not. So just be careful of that.
The fifth thing to do would be to have a strategy session with your buyer’s agent. So, sit down with them and talk through exactly what you want to achieve. And if you don’t know what you want to achieve, this is a good time and sit down with them and they’ll probably outline the people they tend to work with and the goals that they tend to move towards. Again, going back to Ben from Pumped On Property, he tends to look at income replacement as a goal and that’s something me and him have discussed in length is that move people towards income replacement and then after that, you can really build your wealth because you’ve got your time back, you’ve got financial freedom. You can use that time to build wealth or to live your life.
So, if you end up going with him, you’d sit down with him for like a 15-minute strategy session and he’d talk through what he does, he’d talk through your goals and see if you’re a good fit. Now, a good buyer’s agent will see if you’re a good fit or not. And if you’re not, they’ll suggest you somewhere else. And if you are, then they can help you move forward. So, definitely have a strategy session.
Again, this comes back to doing your research on the buyer’s agent. Finding out what they’re like and if they’re someone that you want to work with. A strategy session – even though you’re going into the strategy session trying to work out, okay, what do I want to achieve financially? What’s the best way to get there? Also go in thinking about, well, how is this buyer’s agent to work with? What are they like? Is this someone I can see myself working with long-term?
Because, ideally, if you find a good buyer’s agent, you’re going to want to buy a few properties through them because they provide a good service. So, in that strategy session, even though they’re trying to work you out and work out what your situation is and they’re trying to sell you on their service, you also want to be scoping them out and finding out, is this someone that I can work with long term, someone that I trust? Or do they seem a bit off? And so, work that out when you have your strategy session with them.
The sixth thing to do would be, when they present properties to you, you still need to do your own research. Look for other properties in the area, find out what they’re listed for, look at what they’ve sold for. There’s a great free resource called onthehouse.com.au where you can see related properties in the area and what these properties sold for. Or you can just go on realestate.com.au, look at the area, look at similar properties. You want to make sure that the property they’re providing you is well-priced for the area. And so, make sure you do your own research on the property that you’re investing in.
And the seventh thing to do would be to research the area that you’re considering investing in. So, hopefully your buyer’s agent has a strategy as to why they are investing in an area. Generally, they do a lot of deep-diving into an area. I know Kath from Everyday Property Investing focuses on a few areas and knows those areas really well. Same with Ben from Pumped on Property, he has specifically chosen 5 areas or something like that and he knows them inside and out. He knows every listing and hopefully they’d have that but you still want to back it up with your own research.
Look at the area, do simple things like look at the population growth in the suburb. Google census quick stats and go to the census quick stats and look at the population in the suburb. Has the population grown overtime or are people leaving the suburb and find out why they’re leaving the suburb. Go and look at vacancy rates as well, check out SQM Vacancy Rate Tool. Just go to Google and type in “SQM vacancy rates” and that will bring up that tool. Look at the area, are vacancy rates declining? Are they low? Or are they high? Are they increasing? Basically, you want low vacancy rates or declining vacancy rates in an area. So, there are 2 things to check, population and vacancy rates. And there’s a whole bunch of other things that you can check as well but that is a topic for another day.
So, there you have 7 things that you should do before buying property through a buyer’s agent.
The first is to view their property portfolio. Make sure that they’ve invested in properties and achieved a similar thing to what you want to achieve. Because then you’ll know their skill set is matched up with your financial goals. Second thing is to talk to their past clients. Third thing is to Google them and try and get a feel from them, listen to podcast or interviews or read their articles or find out reviews of what people have said about them. Fourth thing is to find out how they’re paid. Make sure there’s no conflict of interest there. Then you will want to have a strategy session and you’re scoping them out in that strategy session and you then want to look for similar properties in the area once they present a property to you and you also want to be doing your own research on the area, making sure that this is going to be a good area to invest in.
So, I hope that this has been helpful. I’ve actually created a handy checklist of these 7 things you should do before buying property through a buyer’s agent. Simply go to onproperty.com.au/agent, A-G-E-N-T in order to get access to that free checklist. This is a checklist, just a one-page pdf that you can print out and you can just make sure that you go through all of these things. Make sure that you’ve got all your bases covered so that you’re not buying a dud or not going with a buyer’s agent who probably isn’t well suited to you or who might not be the best buyer’s agent.
You know, I should really get a list of buyer’s agents together or of people that I recommend or people that I know are good because I do talk to a lot of buyer’s agents. I do have relationships with some buyer’s agents and so I can point you guys in that direction. Actually, look, I’m going to create this page right now. If you want to check out my list of recommended buyer’s agents, you can go to onproperty.com.au/buyersagents. Both plural, “buyers” “agents”, and you can check out the buyer’s agents that I recommend over there.
I will put a disclaimer on any agent that I get a referral free from so you can know that, okay, he might be just recommending this person because he gets a referral fee. But, look, I love my customers, I love my readers and I wouldn’t jeopardize my readers by recommending someone that I don’t actually think is going to be a good fit or provide a good level of service because I’m this for the long haul.
Anyway, you can check that out, onproperty.com.au/buyersagents to see the buyer’s agents I recommend or onproperty.com.au/agent to get a list of the 7 things that you should do before buying property through a buyer’s agent.
Okay, so I hope that this has been helpful to you. Go out there, do your own research, choose a buyer’s agent that’s going to move you towards financial freedom and until next time, stay positive.