09 Dec Buying property with your eyes wide shut – Rich Harvey
Some people believe that with the internet and the amount of information that’s available, it’s relatively easy for you to buy property sight unseen. Rich Harvey, president of the Real Estate Buyers Agents Association of Australia, sounds a note of caution and has some sound advice on the issue.
Kevin: On this show in the past, we’ve carried some comment from people who’ve said with the way the internet is now, with the amount of information that’s available, it’s relatively easy for you to buy property sight unseen. I’ve always questioned that, I’ve wondered whether that’s, I don’t think it’s something that I would do. I’m prompted to talk about this because of a release I read from Rich Harvey who is the president of the Real Estate Buyers Agents Association of Australia. He joins me. Good day Rich, how you doing?
Rich: Very good Kevin, great to be on your show again.
Kevin: Thank you. I know this could be seen as somewhat as a bit of a plug for buyers agents but I don’t really want it to be that way. I want to talk more seriously about the value of the internet, the value of the information that’s out there and how do we best assess that, if we can discuss it in that way Rich.
Rich: Absolutely. Whether people do it on their own or whether they use buyers doesn’t worry me but at the end of the day it’s all about making sure you protect yourself and get the right advice and protect yourself from making a bad decision. I think a lot of people, as you say, jump online and see some beautiful looking properties but they may not know that those photos have been photoshopped or they’ve taken a wide angle lens to that room to make it look twice the size that it really is. People may not know that there’s an electricity staunchion over the back fence or a land subject to flooding. There’s all of those things that really mean people must do a physical inspection or if they don’t do it themselves, get someone else to do it for them.
Kevin: Yes, I guess in a way too, and if you think that photo shopping doesn’t happen, well then you’re wrong because it does and there have been a couple of classic examples of where it’s happened, some more dangerous than others. A little bit of photo shopping to make a river look more blue than what it is isn’t really a biggie but certainly if you take out a power station which I’ve seen happen and also take out power lines which, it should be illegal.
Rich: Well it should be, it’s false and misleading and under the trade practises act to misrepresent anything. But I think in terms of photographs, there was a great one earlier in the year which had a water tower that had been photoshopped out of a backyard or a neighbouring property. But those sort of things, it’s about getting the property into context. It’s about looking at the streets where you end up buying and making sure they’re not too busy. If you’re going to be home buyer or an investor to some degree, it’s about making sure that you’re buying in a neighbourhood that’s got the right fundamentals for growth, that doesn’t have the wrong kind of demographic that you’re looking for to buy into. It’s about getting all of those things checked on your list.
Kevin: Yeah, every property we’ve purchased we’ve gone and inspected it at different times of the day. Not had a physical inspection on the property but the area. We’ll get out of the car, we’ll walk around, we’ll have a look at the types of housing. We’ll do it at different times of the day because areas change from lunchtime to evening time to breakfast. You’re looking at traffic flows and all that sort of stuff. That’s a lot of very important due diligence on the ground that you really have to do, I think.
Rich: Absolutely. You can’t just use Google Maps and Google Earth to do an aerial flyover. There’s a lot of things that when you turn up to a property you’ll go, “Oh my goodness, I’m so pleased I came to look at this property.” Equally you can also find a diamond in the rough. You can actually find properties that people turn away from and it’s a cosmetic reno or a decent reno will really bring it up to scratch. So you can actually miss opportunities too by looking online and looking the wrong way. Getting that property into context, talking to the local agents, talking to local neighbours, talking to local shopkeepers, all of that is incredibly good intelligence. I call it recognisance. It’s a bit like ground trooping. It’s a bit like when an army’s going out to investigate new territory, they do recon and as a property investor you’ve got to do the same. I call it ground trooping. It’s getting out there, identifying the local drivers of the market and identifying the properties that are best suited to your portfolio.
Kevin: With any type of investment, whether it be property or cash or shares, I think there’s a certain amount of personal accountability you need to accept. You can’t abdicate the responsibility. You can certainly delegate it which I think is what you do when you employ a buyers agent. You sort of say to them, I’d like you to help me find the right property but at the end of the day you need to accept the fact that you will have to make the final decision. At the end of the day, it is your money that you’re spending.
Rich: That’s right, it is, it’s the buyer’s money. As buyers agents, we have a very strong thing called fiduciary duty which means we have to put our clients interests ahead of ourselves. So we can’t just, and we never do, we don’t push a client into any deal or force them to buy a property just so we get paid. We diligently identify the right areas to buy in and then we diligently assess whether those properties are going to fit their criteria that they’re looking for. But as you say Kevin, it is, at the end of the day, property investment is a risk and no buyer’s agent can control the market. They can’t control all the factors, they can’t control who moves in next door or whether the council’s going to rip up the road and do something different. You have to take all of those factors into account but getting someone who is independent of you as a professional and does it every day of the week is another way to mitigate that risk.
Rich: A good buyer’s agent will go there, they’ll have deep relationships with agents in that local area to get both on and off market properties and they should have a very clear process by which they do an assessment of the property that they end up buying for you to make sure that you pay the right price.
Kevin: Yeah, I think we need to accept also the fact that the best investment property might not necessarily be right where you live. You may have to go shopping elsewhere in which case you can employ a buyer’s agent to do some scouting for you, but as I say again, at the end of the day the responsibility is up to you as the investor to make that final decision. You can’t then turn around and blame someone for a bad investment if you’ve accepted that responsibility yourself. That’s my view anyway.
Rich: I agree, that’s absolutely right. Just because the market doesn’t perform as you’d expect it or as some expert as said, at the end of the day you have to invest your own money. But getting a professional to help you do that process helps to minimise that risk. I think you mentioned something that was useful too is just buying inter state. Like you say, a lot of properties that we’d like to buy are not on our own backdoor and I think it’s important for investors to dig beyond their own backyard and to look at where the market’s moving. But also look not just in the short term but the longer term and look where those jobs are going to be and where that big population is going to be located and the infrastructure that’s going in to support that population growth.
Kevin: Yeah, Rich Harvey, my guest. Rich is the president of the Real Estate Buyer’s Agents Association. Thank you very much for your time Rich.
Rich: My pleasure Kevin, always good to chat with you.