Is the property advice you are getting real investment advice or is someone just trying to sell you something? Understanding the difference is vitally important if you want to become a successful property investor.
Investment advice or sales advice? What kind of property advice are you really getting?
Hey, I’m Ryan from onproperty.com.au, helping you find positive cash flow properties. One of the biggest mistakes that people make is they take sales advice thinking that it’s investment advice and they go ahead and overpay for a property or buy a dud property. So it’s really important that when you’re getting advice from someone – whether it be a consultation, whether it be an online video like this, whether it be a seminar, whether it be a property group or a night meeting, whatever it is – you need to understand, is this person giving me investment advice or is this person giving me sales advice?
The easiest way that you can distinguish this is how is this person making their making their money and who is paying this person? So whenever you’re sitting down, whenever you’re getting property advice, you need to think to yourself, “How is this person making money?” You’ve heard the saying, “There’s no such thing as a free lunch”. So you need to understand how this person’s making money because that affects the advice that they give.
Think of a normal sales person selling a computer. Okay? Let’s say you into Harvey Norman and there’s 20 computers there and you don’t really know what you want. You’re not sure so you go up to this salesperson and you’re like, “Okay, I’m interested in buying a computer. I’m not really sure what I need. What do you recommend?” In a lot of cases, the salesperson will try and be a good salesperson and understand what you need. But if there’s a computer in there where they’re going to make $200 commission and there’s one that they’re going to make $10 commission, do you think they’re going to steer you towards the $10 one or towards the one that makes them $200?
It’s the same situation when it comes to property. If you go to someone and they’re making commission from the sale of the property. Generally, this is from the sale of a new-build property, house and land package, some sort of unit block, some sort of new-build development. If they’re making $20,000, $30,000, $40,000, $50,000, $70,000 from the sale of one of these new-build properties or they can recommend an existing property where they don’t make any commission, where do you think they’re going to try and point you towards? Of course, they’re going to point you towards the one where they make the money.
So you really need to understand, how is this person making money? Are they making any commissions from the sale of this property? Generally, if it’s a new-build property, the answer is going to be, “Yes”. Unless they’ve explicitly disclosed otherwise, they’re going to be making commissions from the new-build property. It’s really easy to put commissions into the building contract; to put it as services, to leave it undisclosed or to disclose it in fine print.
So if it’s a new-build property and they’re saying to you, I recommend investing in this because of the great depreciation, here’s a house and land package, rental guarantee – all this sort of stuff kind of indicates that they’re getting a commission from that. If they’re offering their services to you for free, 99 times out of 100 it’s going to be sales advice unless it’s a good friend trying to help you out.
You want to get investment advice, ideally, from someone that you pay for the advice from and they don’t have a conflict of interest where they’re also making money from somewhere else. You want their source of income to be just from you as a customer and that gives you a better chance of getting good, solid investment advice. You also want that person to really understand your needs and really understand where you want to go and what you want to move.
You don’t want that person to push they think is best for you on you. So if someone is trying to understand, “Okay, what do you really want to achieve and here’s how we can go and get that.” that’s a good sign. If someone’s like, “Well, here’s how I think you should invest and you should sort of change what you want because this is a better option for you.” that’s generally going to be sales advice, rather than investment advice.
When you’re out there and you’re getting advice on property, just be careful. Is it sales advice where they’re trying to sell you something or is it actually investment advice where they’re trying to help you and help you get the best outcome.
I’m Ryan from onproperty.com.au. If you’re still not sure whether you’re getting sales advice or investment advice, it’s always to go ahead and to research the area and to analyse the property yourself.
I’ve got a new video course coming out on how to evaluate a property, to work out whether you’re overpaying for that property; whether that property is the right value and to do a whole lot of research into that particular property. That’s currently in pre-sale, if you want to check that out, it’s going to be launching on the 15th of November. You can check that out, just go to onproperty.com.au/property to get access to that course and I’ll help you do your own research into the properties that are being marketed to you so you can say, “Okay, well, is this good investment advice or is this just sales advice?” Again, that’s onproperty.com.au/property.
Until next time, stay positive.