Questions to ask prospective buyer's agents or 'mentoring' companies?

Hi fellow comrades,

I'm still an absolute rookie in the investing game and looking to purchase my first IP around the end of the year. I've been doing my own research for the past six months and looking at which strategies would best suit me to get me to my long term goals.
As I am keeping all avenues open at the moment, utilising the services of a buyer's advocacy or mentoring group to help me purchase my first IP is viable option.
Therefore, my question is (in two parts), when shopping around for the 'right' buyer's advocacy or mentoring group, what questions should I be asking them to find out if they are the best company to suit my needs?
And, what steps should I be taking to see if they are a legitimate company that has a proven track record?

Thank you in advance for all your advice and Happy Easter!!

Kind regards,

Taku
 
The "questions" you need to ask do not exist.

What are you looking is how the buyers agents answer in response to your questions.

When asked a question, most people will tell you want you want to hear. But when it comes down the crunch its usually a different answer.

I'd say go by recommendations off others.

If a buyers agent is also buying properties for themselves, then there is a conflict of interest - eg. one would think they would keep the good ones for themselves and left you with the scraps. Its up to you to read between the lines.

For me, i needed an agent who could and would be willing to knock sense into me, not one that sugar coated the truth so that my feelings wouldnt get hurt.

Anyway, my recommendation is to go with Propertunity. I've used his services before - straight up, no BS, gets the job done.
 
Thanks neK for getting back to me.
I agree, I don't want anyone to sugar coat and be left left dissapointed when the results dont live up to my expectations.

Cheers!
 
I think if you have no strategy that is the first thing you will need help with otherwise it will be impossible for a BA to find a property that meets your needs.

A good set of requirements - budget, yield preference, dwelling style, geographic area, renovation or no and strategy are the basis for building a good BA relationship.

A BA can't find the 'right' property for you unless you know what it is.
 
...Therefore, my question is (in two parts), when shopping around for the 'right' buyer's advocacy or mentoring group, what questions should I be asking them to find out if they are the best company to suit my needs?...

Firstly you will need to be clear in you own goals.

Secondly you need to be clear in your own mind what you think the BA will provide. If their sums per annum are 1% off for RR and 5-10% off for growth figures then their service is of no value and has put you already behind because of the cost of their service.

Personally, I would read the blogs and interview section and make some notes on strategy, and then look to proceed from there by knowing how to do the sums on each potential property myself with confidence. I've added a link to my older thread with best investment advice & quotes for a bit on inspiration & ideas. http://somersoft.com/forums/showthread.php?t=96723
 
Hi Taku,

We have just gone through the process of purchasing our first IP, and we worked with a buyer's agent. There are some good threads on questions for BAs that I recall reading when I did my research so I won't repeat all of those, just the key things we've learned over the past few months that may be relevant to you:

- I agree with what the previous posters have said, I think you definitely need to have a strategy locked in before you engage with a buyer's agent. I didn't have a firm strategy in mind when I first met with a few different BAs, which was hard because some of them had different specialties or areas of focus, which all seem attractive when they explain the reasons why they prefer certain strategies over others (e.g. blue chip apartments for growth but highly negatively geared versus conservative growth suburban houses but neutrally geared). You have a wealth of knowledge and support available through the forum to help you refine your strategy, so I recommend just throwing ideas out there in new threads (Tulla style) to see what other people say, and you'll definitely get there.

- Personally, I didn't feel comfortable with using a BA that either gets a commission as a percentage of the IP purchase price, or one that is also involved in selling properties. I just saw these as conflicts of interest that I'd prefer to avoid. Have a think about whether either of those things matter to you.

- Think about how much you can afford to be out of pocket each week (assuming you don't end up positively geared), and make sure that you communicate this with the BA. Our initial focus was just on borrowing capacity, but as we went along we realised that two similar properties with the same purchase price could differ significantly in out of pocket expenses, e.g. an average 2 bedroom apartment versus an art deco 2 bedroom apartment (where the 2nd bedroom is too small to use as a proper bedroom so in terms of rent it's close to a 1 bedroom), renting at $450 per week compared to $400 per week. Setting a limit for both purchase price and weekly out of pocket costs can help a BA find something suitable for you.

- Another difference I found between some BAs is how much they are willing or able to educate you on the process. Some may be willing to do more hand holding and bring you out on property tours so you can learn first hand what they look for and the thought process that goes in to evaluating each property, whereas others may have more clients/less time to spend on educating you while also locating a great property that meets your criteria. So it's worth thinking about whether you have the time (including the ability to get away from work during the week to look at off market properties for example) and desire to learn, or would you prefer a set and forget relationship with your BA. Then ask any prospective BAs if they are happy to work whichever way you prefer.

- Are you comfortable with using a BA in a different state and buying interstate? We weren't, but in hindsight now that we have been through the process, I think limiting yourself to BAs and properties in your own state is a mistake. Primarily because you are significantly restricting the pool of properties available to you. I would imagine many BAs have lots of experience working with interstate or overseas clients, so I don't see this as a significant drawback. Again, work out your preference and make sure that any interstate BAs you talk to are comfortable working remotely.

- Think about why you want to use a BA. With enough research, many people can get to the stage of feeling confident enough to make a purchase without hiring someone to assist them. Also, working with a BA doesn't absolve you from needing to carry out your own research and due diligence, because ultimately they are just making a recommendation based on your criteria, and there are no guarantees that they can make around how well the purchase will work out for you. So you still need to do a lot of self education and analysis to make sure you can make informed decisions when you are ready to pull the trigger and buy.

- In terms of finding a reputable BA, my advice would be to listen to recommendations from the credible Somersoft posters (I don't consider myself a credible poster on this forum yet, hence the lack of a specific recommendation). Once you have a strategy in mind, you could even start a thread asking for recommendations for a BA that people with a similar strategy have used.

Hope that helps.
 
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Firstly you will need to be clear in you own goals.

Secondly you need to be clear in your own mind what you think the BA will provide. If their sums per annum are 1% off for RR and 5-10% off for growth figures then their service is of no value and has put you already behind because of the cost of their service.


Impala67 I don't quite understand what you mean by this.
Would you mind elaborating please?

Regards

Taku
 
Shab, thanks for such an extended response.
It's definitely helped!
I agree with what you said, I too would feel unfcomfortable with a BA that is getting paid by parties other than myself..
If I was to get a BA, I would want them to educate me throughout the process, therefore I would be better equipped when acquiring properties on my own accord.
I think the underlying feedback i've gotten so far is to first decide on a strategy to reach my goals, then start thinking about BA's and/or mentors..

Cheers!!
 
Impala67 I don't quite understand what you mean by this.
Would you mind elaborating please?

Regards

Taku

Hello Taku and welcome.

What he is saying is for you to work out your own projections for future capital growth and rent return (I think), or interest rate rises.

Let's say they tell you "this property will make 5-7% per annum capital growth" each and every year from now until infinity. In reality it might make 0 - 4%. The cost blowout to you will be unsustainable, but too late, you are stuck with something that will cost you a big $$$ mortgage. The agent has received his payment regardless.

Let's say they tell you that it will rent for $400 a week when really it will only rent for $320. Your cash flow is now -$80 a week but you have already agreed to take on the mortgage.

Let's say the agent shows you a budget based on 5% interest, but you can only qualify for 6%?
 
Hi Taku

My suggestions are as follows:

1. Get clear on the property investment strategy that best suits you. If you're not sure, you might like to read Stewart Wemmys book called The Property Puzzle.
2. Get yourself a great broker and advisor who specialises in property investment. Personally, I recommend Joanne Attard. Get yourself a finance pre-approval so that you know exactly what you are aiming for.
3. Once you know what you are aiming for, read up. Identify markets that suit your strategy and price point. Herron Todd White are good, and they give a free Month in Review and 'Market indicators' in the API magazine. Magazines and online data will help you identify your general location.
4. Check out the Real Estate Buyers Agents Association of Australia (REBAA), and ask around for BA's in the area you are interested in.
5. Phone or email potential BA's to see if they are available, and suitable. If you are uncertain, a conversation with a BA can help you determine these things.
6. Don't be afraid to state what you would like from a BA. Most BA's will be happy to work in with your needs and the the level of involvement you are comfortable with.

Cheers

Jennifer
 
Let's say they tell you "this property will make 5-7% per annum capital growth" each and every year from now until infinity. In reality it might make 0 - 4%. The cost blowout to you will be unsustainable, but too late, you are stuck with something that will cost you a big $$$ mortgage. The agent has received his payment regardless.

Let's say they tell you that it will rent for $400 a week when really it will only rent for $320. Your cash flow is now -$80 a week but you have already agreed to take on the mortgage.

Let's say the agent shows you a budget based on 5% interest, but you can only qualify for 6%?

Hey Angel,

Thank you for your explanation.
Things are clearer now.

Regards,

Taku
 
1. Get clear on the property investment strategy that best suits you. If you're not sure, you might like to read Stewart Wemmys book called The Property Puzzle.
2. Get yourself a great broker and advisor who specialises in property investment. Personally, I recommend Joanne Attard. Get yourself a finance pre-approval so that you know exactly what you are aiming for.
3. Once you know what you are aiming for, read up. Identify markets that suit your strategy and price point. Herron Todd White are good, and they give a free Month in Review and 'Market indicators' in the API magazine. Magazines and online data will help you identify your general location.
4. Check out the Real Estate Buyers Agents Association of Australia (REBAA), and ask around for BA's in the area you are interested in.
5. Phone or email potential BA's to see if they are available, and suitable. If you are uncertain, a conversation with a BA can help you determine these things.
6. Don't be afraid to state what you would like from a BA. Most BA's will be happy to work in with your needs and the the level of involvement you are comfortable with.

JenJen awesome tips!
Much appreciated..
I haven't heard of that book so i'll be sure to read it now.
Hopefully it'll give me a bit of guidance on strategy.

Many thanks

Taku
 
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