Sometimes when we go into any endeavour, it's not so much a matter of how much we know. It's a matter of what we don't know, and this highlights some of the common mistakes that property investors make.
What are the top mistakes for investors?
We asked Jacob Duane, Director or Bennett and Phillip Lawyers what the top three mistakes he had seen investors make were. The first one he listed was going in with other people.
Jacob said: “Years and years ago, I was involved in an investment property transaction. Family, in-laws, friends, it was a decent bit of property. But honestly, different stages of life, different investment appetite, and changing family circumstances all imploded. So, I see this regularly, and my advice is always to avoid it at all costs.
“One of the things that a lot of these co-interested investors don't consider is a Lot Owners deed, which actually outlines the exit opportunities for them at all stages of the ownership.”
What else should investors be aware of?
Getting building and pest inspections done when looking at a property are complete musts. You never know what a simple search may turn up, and how much money and bother it will save you in the long run. Jacob recalled one person who had an extension built over underground easements, after which the council turned up and needed access to the sewer. These people were forced to remove that part of the building.
Jacob said: “One thing that people need to remember is that the consultants generally haven't seen the property. So, I don't know whether that pergola looks like it's approved. So, I don't know whether it's appropriate until you obtain a full town planning certificate. I don't know whether we need to get a building approval search done. People say, "Well look, just order the relevant searches." And I say, "Look, to me all the searches are relevant because they're all going to turn up something." It's a commercial call for you as to what ones you want to take, and what risks you're prepared to take.”
What are spruikers and why should you be wary?
A spruiker is someone who tries to persuade people to buy something, use a service, or something along those lines. They often sell these products or services in an exaggerated or dishonest manner. The rise in property prices has seen a return of the property spruiker.
Jacob explained: “Spruikers have a role, but I think what investors have to do is ask a lot of questions. You don't necessarily have to use those associates recommended by the spruiker. You may use some, you may use the real estate agent, you may use the accountant. But what you need to do is go in with your eyes wide open, having asked a range of questions. Advisors have the obligation to provide recommendations to their clients that's in the client's best interest. You've always got a question about whether there's a conflict between your advisor and whether your best interest is being considered.”
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