Nobody signs on for an investment property thinking they’ve overpaid.
Most people will genuinely high-five their partner, or themselves, and think: Finally, I’ve done it. I’m on the path to financial freedom. And we’re not here to burst that bubble.
We’re here to help you make the decision with all the facts in front of you.
Because buying an investment property and buying a good investment aren’t necessarily the same thing. So, what should you actually pay for an investment property? Well, it depends on your financial situation, borrowing position, the type of property you’re buying, where it is and what the market is doing.
But there’s another part of the price that’s much easier to miss.
The property investment sandwich
Picture your investment property as a sandwich.
The land is one slice. The property being built is the other.
But sitting between those two layers can be a range of other costs.
- Referral fees for the person or business that sent you there.
- Marketing costs.
- Sales commissions.
- Project management fees.
- Other undisclosed costs connected to getting that property packaged, marketed and sold to you.
You might never see those layers itemised on an invoice because by the time you enter the picture, you’re simply given one total figure. And that’s where the problem can begin.
The issue isn’t that businesses make money or that people are paid for the work they do.
The question is: Do you know what you’re actually paying for? Or are you paying more than the property’s actual value?
The effect of hidden costs on your investment
You’re on the starting line to financial freedom. It’s exciting. But imagine discovering that you’re actually starting $100,000 behind.
Yes, it happens.
Say you’re working with a property investment firm and you’ve just paid $800,000 for a property the market values at $700,000.
- Before the property has grown by a single dollar, you’re already $100,000 behind.
- That extra $100,000 is part of your loan. From the first repayment, you’re paying interest on an additional 100K.
Nothing is wrong with the property. The suburb may perform well. The property may grow in value. But, you’re starting your investment journey with a $100,000 deficit.
Which means, for a while, the growth of the property isn’t building your wealth. It’s getting you back to the starting line.
When you’re buying property as an investment that insight matters. The starting number can have an enormous impact on the rate at which you build wealth and how soon you pay off your mortgage.
So how do you know if it’s actually a good deal?
Someone telling you it’s a good investment isn’t enough. Especially when they’re also the person selling it to you. And, you shouldn’t need a property degree to work out whether the numbers make sense for your situation.
Here are six questions to determine if you’re getting a good investment deal. You should be able to ask these questions and get clear, evidence-based answers. If you can’t, that tells you something too.
Ask your firm these seven questions:
- Have there been any valuation issues arise with other clients purchasing properties in this area?
- What is the land worth and are there any rebates associated with the purchase that I have not been made aware of?
- Are there any incentives offered to you, or the business from the developer to sell in this location?
- How does the build cost compare with similar builds from other companies?
- What data supports your recommendation?
- Are there any other commissions that are yet to be disclosed?
- And most importantly – Can I show your research to an independent adviser of my choice?
Because a good investment decision shouldn’t rely on how convincing the person across the table sounds.
The numbers should be the backbone of your investment.
That’s the difference with Investor Assist
We don’t put an investment forward because we think it looks like a good opportunity. We’re led by your investing ambitions and financial goals.
Our recommendations are backed by independent data, including Oxford economics, Terralytics and government resources. This way, when we present the options, you see the thinking behind the property you’re considering – before you commit.
And because of our builder-direct model, you’re not paying an undisclosed sales layer between you and the investment. You get what you see and the price doesn’t change.
That means, you’re making an investment decision based on the full picture.
Our goal isn’t just to help you buy an investment property. It’s to help you make sure the investment stacks up before you do, and support you from first conversation, well beyond handover.
Building wealth through property starts with understanding what you’re investing in.
Learn how Investor Assist works, view our Investor Track Guide.
