How Protected are Your Assets

For most investors, property is the ticket to financial freedom. Many investors, however, fail to properly look after their investments, putting not just their future, but everything they own at risk. Investment properties can make many of us feel financially secure, but it’s worth taking a close look at how well a portfolio stands up to any potential nightmares, to ensure you aren’t running the risk of losing everything

How Risky are Your Property Investments

Investment properties can make many of us feel financially secure, but it’s worth taking a close look at how well a portfolio stands up to any potential nightmares, to ensure you aren’t running the risk of losing everything.

The unexpected can always happen and things can go wrong, so investors are wise to consider asset protection from the early stages of their portfolio.

Unfortunately, on the whole, asset protection is not well understood by property investors. While most understand the importance of being protected, few actually take out insurance or fail to receive the full benefits associated.

Protection can range from the structure in which to purchase the investment, whose name to buy in or even the specific type of insurance required.

Without the correct protections in place, investors run the risk of losing everything if something goes wrong. For an investor or for that matter any home owner skimping on insurance is not a particularly good idea.

As an example, if someone was to be injured or worse at your investment property, and there was a lawsuit brought against you, it is possible that your insurance would not fully cover the amount of the claim.

In a case like this, if the properties are all owned in the investor’s own name, then all the assets can be claimed. This includes the investor’s home.

Knowing which name or structure to purchase an investment in can, however, be a confusing exercise.

It is always worth seeking advice from financial planners, accountants and solicitors that have experience with property.

They will be able to assess your overall situation and help you implement a strategy that is most suitable to your circumstance and your portfolio.

On the Way In

For investors that own, or are planning to own assets other than investment properties, such as a home, it is advisable to keep them separate.

This gives you some protection with claims only able to come against a single property.

There are typically three ways to purchase a property; these include buying it in your own name, in the name of a company or in the name of a trust.

The standard way to purchase a property, in the name of the investor, allows negative gearing concessions and is fairly simple to organise, but provides very little protection should someone sue.

Buying through a company is the next option. This allows the liability to remain with the company, while the shareholders are protected against the banks seizing their personal assets.

This leaves a third option, the trust structure. This can be hairy and complicated, but essentially, if you buy a property in a unit trust then you can apply negative gearing to it because the debt is still in your name and the distribution from the trust becomes income.

The other type of trust, a hybrid trust, is a mixture of a unit and discretionary trust, but banks will not typically lend to this type of trust. For this reason, it is not a popular choice with investors.

Seeking out More Information

Making changes down the track to different investment structures, or adding insurance policies after damages, can be costly.

For this reason, obtaining advice from accountants, solicitors, financial planners and insurance specialists are worthwhile steps before deciding on what is right for your portfolio.

When your portfolio holds your potential future financial security, it may sometimes be worth considering more expensive insurance packages for peace of mind.

How to Get Agents to Find Your Dream Property

When you are looking to buy a home sometimes the key is to talk to an agent, tell them what your looking for and let them help you find the perfect home. Once they are familiar with who you are and your search criteria, they will keep you updated as soon as new listings hit the market. You never know you may end being able to negotiate on a property before anyone else does.

Communicating with Agents

Don’t be shy to tell an agent what you’re looking for. Once they are familiar with who you are and your search criteria, they will keep you updated as soon as new listings hit the market. This puts you in a favourable position to view a property before anybody else and potentially be the first person to negotiate on price.

Always be truthful when it comes to giving feedback about a property you have seen. Most agents will follow up all buyer inspections with a phone call. They are likely to ask you what you liked and disliked about the property and what you feel it is worth.

Although the agent is working for the vendor, don’t think that buyers aren’t important to them. Nurturing the buyer is just as important as looking after their vendor, after all no buyer means no sale. Don’t be afraid to ask your agent plenty of questions, it will show that you have confidence and experience in dealing with real estate transactions. Most agents will only be too happy to answer your questions.

Here is a list of some important questions to consider asking your real estate agent:

  • Why is the vendor selling? Knowing the answer to this could put you in a better position to negotiate a sale. While the agent is not obliged to tell you the answer, particularly if the seller has asked for confidentiality, in most instances they will be happy to share this information with you.
  • What did the vendor pay for the property and how long ago did they buy it? This can help you establish fair price but remember there are many factors to consider, such as capital growth, improvements to the home, the state of the market they bought in and current buyer demand.
  • How long has the property been on the market? If the property is a new listing you can expect the greatest amount of buyer interest at this time, however if it has been sitting on the market for a long time then this may put you in a strong position to negotiate price.
  • What do you expect the property to sell for? While you may think agents are willing to stretch the truth on this one, there are strict regulations and large penalties imposed on agents if they over quote the price of a property. The agent should tell you the same figure that he has told the vendor, however depending on buyer demand, this price can vary throughout the marketing campaign. It is also a good idea to ask the agent to give you a list of comparable properties that are either on the market or have sold in the last six months. This will help you to make up your own mind regarding price.
  • How soon do the owners have to move? Asking this question, opposed to “how long is settlement?”, will reveal if the vendor has bought elsewhere and just how eager they are to achieve a sale. Once again helping you know where you stand when it comes time to negotiate.

How Best to Negotiate Price With Your Agent?

The first thing to consider prior to making an offer or starting negotiations, is the state of the market as this is likely to influence your ability to “get a good deal”. If you’re in a “buyer’s market” when conditions typically favour buyers because of greater supply and less demand then your chances are going to be good. However, if you’re buying in a “seller’s market” when there are a shortage of homes for sale and plenty of active buyers then it is likely you’re going to have to be more flexible with your negotiations or face missing out to a more competitive buyer.

The second factor to consider is your situation. Have you been looking for months with no success or have you just begun your property search? Have you already sold and a looming settlement deadline is fast approaching? In this instance, you may want to make an offer immediately and at the full asking price. If you’re in no hurry and under no pressure, then this is a great opportunity to negotiate the lowest price possible.

If you find a home you love it is a good idea to let the agent know you’re interested so he will include you in any negotiations should another party also be interested in the same property. However, it is best to keep your emotions to yourself. Expressing interest and asking questions is the right thing to do. Being too eager and desperate will potentially put you in a weaker position to make a low offer.

Always put your offer in writing to the agent so they can formally present it to the vendor. This shows the vendor you are serious about buying and opens up the negotiations. Ask the agent to get back to you within a designated period of time whether they have a response from the vendor or not, for example within 24 hours. This also shows you mean business and are willing to walk away.

If your offer has been verbally accepted by the vendor, this does not mean it is a done deal. Until legally binding contracts have been signed (a process which differs from state to state), the property is still for sale and open to other offers. Be sure to ask your real estate agent to give you the opportunity to make a counter bid if another offer is received. The agent is not obliged to disclose this offer to you. This is when negotiations become difficult and you may need to come in with your top price, as well as be prepared to walk away from the property.

The Role of a Buyer’s Agent

Buyer’s agents do not sell property, instead they are licensed professionals that work exclusively for the buyer when purchasing a property. A buyer’s agent specialises in the searching, evaluating (working out fair price) and price negotiations on behalf of the buyer.

They are required to give impartial advice and must be totally independent. In other words, they should not accept sales commissions from agents or vendors when you use their services to purchase a property.

Using a buyer’s agent is intended to save you time and the hard work that can often go into searching for a property. A buyer’s agent will usually do the running around for you and then present a shortlist of properties that meet your search criteria.

They are professional negotiators whose aim is to find you the right property at the best price possible. They should be able to provide you with research to help establish the true value of the property you wish to buy so you can make an informed choice.