Having been involved in the Financial Planning industry, I witnessed a massive hole in the industry for direct property investment. There simply were not many financial advisors willing to provide advice on property investment. In fact, the financial advice process was heavily biased towards share investments, even though the significant advantages of property investment were easy to point out.
There are numerous financial advisors who have made significant money from investment properties themselves yet will not provide any advice to clients on property investment and will instead direct them to share investments.
This is one of the many reasons that you should be engaging a specialist property advisor as part of your investment property purchase. Financial advice for property investment is very rare in the financial advice industry, and finding a financial advisor for property investment is very difficult.
Why Don’t Financial Planners specialize in property investment?
This has been an interesting question. Why don’t financial planners specialize in property investment? Within the financial planning industry there are numerous financial planners that recommend asset allocations with only a small allocation towards direct property, if any!
For the direct property investments, they have their clients invest in a Real Estate Investment Trust (REIT) and call it direct property. Yet they themselves will have multiple property investments which they have made money from, and continue to invest in.
It really is crazy!
The reason that many financial planners will not recommend direct property investments is that the sector is relatively unregulated, and they are not licensed to do it, and most importantly they probably are not covered by insurance if they do recommend the property.
Another major factor is that many financial advisors will not make any ongoing commission from you if you purchase a property. They do not get to make the management fees and on-going commissions that they can from share investments. Whilst this has been lessened in recent years from the introduction of the ‘fee for service’ model for financial advisors, it is most definitely still a factor.
As financial planners do not regularly advise in property investments, they are not real estate experts. In fact, many of them may have very little skill and expertise in this area. As such, it is probably best that they are not providing direct property advice. As real estate investments are a lot different to share investments and share trading advice, it is best that they steer clear of the asset class.
What is a Property Advisor?
What is a property advisor? This is a little more difficult than in may seem. As previously mentioned, this is an unregulated sector. This can mean that some agents without the skills or expertise may be calling themselves property advisors.
You must be careful to find a company and advisor that has the skills and expertise to provide a property for your situation. If you are dealing with a marketing group that has a list of properties for sale, then this is probably a good sign that they are not looking to tailor a solution for your circumstances.
At New Property Australia we like to take a diagnostic approach to property and property investment. This means that we find out as much as we can about your specific situation, and then we seek to put together an appropriate property option to meet your circumstances.
This means that whether you are an owner-occupier or an investor, we are able to put together a property to better meet your situation.
What are the benefits of investing in property?
As you are most probably aware, there are numerous benefits of investing in property. By not including property investment as part of an investment portfolio, financial advisors really are doing you a disservice.
A portfolio that does not include a direct property investment may lack diversification across asset classes.
Some of the advantages that property investment offers over share investment are as follows:
- Greater Leverage: Property is generally favored by banks and lending institutions, and they will lend you more money to invest in property than shares.
- Once you have equity in the value of your property. You can borrow against your property to further invest.
- Taxation advantages: There are many taxation advantages associated with property investment in Australia.
- Diversification: By investing in property, you are in a different asset class than the share market, and may not be subject to the same market influences.
- Tenants are paying off your leveraged debt for you and assisting you to buy an asset.
If you only invest in shares you are missing out on some of these potential advantages! This is one of the issues with solely seeing a financial advisor, and not also seeking the expertise of a property advisor.
How to choose the right property advisor?
When purchasing an investment property, it can be compared to purchasing a business. If you are purchasing a business, it requires careful planning and research. You want to make sure that a business provides income and growth. An investment property is the same, you want to make sure that it provides you with ongoing income and Capital Growth.
A property advisor needs to be providing you with a tailored solution that considers your individual circumstances. There is no such thing as a one property that fits all. There is so much variance across each investor in terms of their borrowing capacity, appetite for risk, cashflow requirements etc.
A good property advisor will start by finding out as much as they can about your individual circumstances. They should then work on your behalf, to assist you to come up with a property option that suits your individual goals and long-term financial objectives.
As always, if you would like to speak with an expert property investment advisor or would like any further information about investment property, please send through an inquiry.
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