Advantage and disadvantage of using a buyer agent

[shim]

Hi All,

Being new to property investing, I have been recently asked to consider purchasing through a buyer agent. I would appreciate any suggestions with using a buyer agent (i.e advantages and disadvantages)

Details via link below:
http://www.yourpropertyclub.com.au/

After reading through the advised plan and products, I have gathered the following advantages:

1. Property will be brand new in new development areas (No stamp duty)

2. Property will be purchased and managed via their management strategy (guarenteed rental)

3. No future costs apart from an % of initial purchasing cost

I was also advised that by going through a buyer agent, they are able to negotiate a lower purchase price compared to the market price by minimum 10 to 30% (since they are dealing with a large amount of properties, they are able to better negotiate price with developers)

(Obvious disadvantages are: uncertainties with regards to location of new development areas, rental yield may be lower than an existing area.)

What might be some other disadvantages I might need to consider?

 

[alexlee]

Buyers agents are supposed to buy based on YOUR criteria. This sounds more like a marketing company. One sign is that they're only selling new properties.

It all smells REALLY funky:

1. Property will be brand new in new development areas (No stamp duty)

2. Property will be purchased and managed via their management strategy (guarenteed rental)

3. No future costs apart from an % of initial purchasing cost

1) Brand new in development areas with hundreds of similar, if not identical, new properties. Let me guess, they also advertise lots of depreciation to lower your taxes.

2) For how long? And is their guaranteed rental higher than market? What financial security do you have that they can continue to pay that guarantee rental? A common tactic here is to guarantee higher than market rent for 2 years to make the numbers look good at purchase, then it reverts to market.

3) I seriously doubt that. What, no repairs? No council rates, insurance? What about your interest bills?

My suggestion: run away. Fast.

 

[Propertunity]

...I have been recently asked to consider purchasing through a buyer agent. http://www.yourpropertyclub.com.au/

These guys may have a buyers agent's licence but their web-site sounds more like a one-stop-shop from my reading.
Also I personally don't like the use of the name "club" in what they're doing. I have no issues with a company charging a fee for service but the word 'club' does not have those overtones.

1. Property will be brand new in new development areas (No stamp duty)

...and traditionally lower CG for the first few years too.

2. Property will be purchased and managed via their management strategy (guarenteed rental)

....whenever I hear the words 'rental guarantee' I run a mile. If the property is good then it can stand on its own merits and does not need a guarantee in my opinion.

3. No future costs apart from an % of initial purchasing cost

Mmmmmmm - really?

I was also advised that by going through a buyer agent, they are able to negotiate a lower purchase price compared to the market price by minimum 10 to 30% (since they are dealing with a large amount of properties, they are able to better negotiate price with developers)

OK so they can negotiaite bulk discounts but you need to make sure that there are no secret commissions or developer kick-backs to the 'club' also. (I am not saying there are, just that you need to check).

What might be some other disadvantages I might need to consider?

Check:
1. With the Office of Fair Trading that they are licenced
2. References from past clients
3. Disclosure of any commission for offering you finance, property, property management services
4. Do all your DD if you are keen to use this mob

.....otherwise have a chat with some exclusive buyers' agents, with no other agendas except buying property for you, in your chosen area of investment and get a 2nd or 3rd opinion.

 

[BuildingBlocks]

I think those above have covered most of it off.

This sounds a bit similar to Custodian Wealth Builders and a few other places I know. Please don't confuse this with a true buyers agent. Never heard of this crowd that you a mentioning though.

Here are my thoughts on Custodian and similar companies:

It is an easy way of buying into new developments, but returns are going to be pretty average most likely. They will probably stress how good the tax depreciation on the properties are, because they will be negatively geared. They have a limited number of sites of which they will offer you. They will probably be alright in the long run if you want to build your portfolio slowly or have a large salary to invest.

I have bought a property through a similar company before, but wouldn't again because my strategy has changed and I can find properties with better returns in the short to mid term, which is important for me at the moment to keep growing.

A "true" buyers agent on the other hand is someone who you pay a set fee, say $5000, provide the criteria of what you are looking for, then they will go out hunting in those particular areas for you. They will look for properties for sale by all agents, use other contacts to maybe find properties not even yet listed. They will also negotiate with the selling agents on your behalf and even bid at auction for you if needed. I see this as very beneficial if you want a helping hand with your first purchase or are stuck trying to find something that meets specific needs. The downside is that you have to pay them, but they may save you much more than their fees.

Hope this clears the difference up a bit

edit: Have just read up on your link and they seem to really enjoy talking about how big they are in the UK, but not on Oz. Steer clear of this crowd and if you really want to invest this way then find a company that has been around doing Australian property for a while.