Clarification of Answer by
07 May 2003 21:49 PDT
Hi, Mark !
Well, part of that's a whole new question, but I'm glad to pass on
what I know.
To take "positive gearing" first - it's a made-up term to mean "not
negative geared"; that is, you intend to get an income stream from
your investment. The real estate agent doesn't need to know anything
about it. You just use the phrase to get him to shut up about the tax
benefits of negative gearing.
What the real estate agent needs to know is that you want a property
which will show a good steady rental return for your outlay.
Make sure you have allowed for the legal expenses such as conveyancing
and stamp duty and the cost of surveys and valuations for loan
purposes, before you decide on the amount of your deposit.
Then for each property in which you are interested get a list of the
annual outgoings such as rates and body corporate levies. Add that to
your expected mortgage repayments and add a percentage to cover
essential repairs, gaps between tenants and unexpected levies. Ignore
the real estate agent telling you the levies and rates are not likely
to increase - he can't possibly know that - and add a bit for
Work out what rent you would need to charge to cover all of that and
still show a profit. If you are going to use a real estate agent to
collect your rent and deal with the lease arrangements on a day to day
basis (highly recommended - this is something they seem to be good at)
calculate their percentage.
See whether it is reasonable to expect someone to pay that rent for
that property in that area. If so, you're fine. If not, look somewhere
Your financial advisor, or the solicitor dealing with your
conveyancing, should be able to help in more detail on that.
As for dealing with the agents themselves - most are ordinary people
out to make a living, even if they do tend to talk the jargon of their
profession. But as commission sales people, it is in their interests -
and the vendor's - to get you to pay the highest price possible, so
take neilzero's advice and tell them your top figure is $20,000.00
less than it is, or they will waste your time and theirs showing you
properties you can't afford.
Set aside three weeks or a month and treat your search for a property
as a job as far as possible. Look at lots of properties with lots of
agents, firstly by price, and then narrow down to area. Look at the
local papers (not the SMH) for a feel for prices. Ignore bargains in
the Multilist colour handout, they've always gone before the issue was
printed. You'll gradually get a feel for which agent knows what.
Remember the agent is not the person you are negotiating with. You are
negotiating with the seller, through the agent he has employed. You
are the one in the strong position.
About the only way an agent will try and manipulate you (outside of
auctions) is by implying there is another buyer after the property -
"A dear old lady wants to buy it for her nephew" or "a nice young
couple just starting out".
This usually translates as:
"If I don't close this sale by Thursday I won't get the commission on
it until next month" or something similar.
You are not trying to buy a house you've set your heart on; you're
after an investment property. If someone else gets in first on one,
good luck to them.
If you are viewing a property that is to go to auction, and you ask
the agent what it is likely to go for, of course he'll quote you high
- it's in his interests as well as those of the seller he represents
to get the highest price. If you've done your homework and really
looked at the area first you'll soon know whether he's right or not.
Read Jenman on auctions (see original answer) and avoid them if at all
possible. It's too easy to get carried away, and you don't know how
many of the other bids are genuine. If you must go to auction, set the
limit you'd be prepared to pay absolutely, and send a friend with a
mobile phone to bid for you.
My personal advice: if you can afford a house rather than a unit, do
so; this keeps the timing and cost of repairs largely under your
control and avoids the whole nightmare of Body Corporate Levies.
Talk to your financial advisor and/or accountant as well as to a
couple of lenders to get a realistic idea of what your limits are
before you start looking, and buy with your head, not your heart.
This is general advice from personal experience, and not intended to
substitute for professional advice. Get finance advice from finance
professionals; real estate agents are expert in selling and managing
real estate, not finance.
The Australian Tax Office, surprisingly, has (usually) helpful and
friendly people on their helplines who can explain the tax
ramifications for you, while you remain anonymous if you like. A large
selection of documents are available from their website:
They also have articles and advice.
A Google search on "dealing with real estate agents" (in inverted
commas) turned up anumber of articles relating to the US scene, which
is different from the Australian.