It has often been said that all advice is not created equal. An advice that has worked well for me may not be for you at all. For as long as Auckland property market remains buoyant, our mainstream media will always be awash with property mentors and investment advisers. How do you navigate yourself through all the commercials, adverts, testimonials promising the Midas touch? If you are already being advised, how do you know that good performance of your portfolio is down to the quality of the advice received and not just propelled by the natural market force?
Here are some tips to consider:
- Find the right adviser. Finding a property adviser is not difficult but finding a good property adviser may be trickier. Ask around at APIA events to get solid testimonials from investors who are in the same situation as you. Be mindful that sometimes the most knowledgeable investors are not mentors because they are quietly doing what they are good at doing, which is investing.
- Know the differences between an adviser and a salesperson. Are you taking advice from a qualified financial adviser or a salesperson? Always find out how the adviser is being remunerated. Are you paying for the advice or are you paying for an investment product? Does he or she have a conflict of interest when giving you advice? This is not to say that a salesperson of an investment product is incapable of giving good advice but be aware that their opinions may not be as unbiased as you would have liked.
- Are they qualified to give advice? While most property mentoring services do not come under the ambit of the Financial Advisers Act, it is prudent to look into the background of the person whom you have come to rely upon for investment advice. What are their formal qualifications? Are there any independent testimonials that speak to their strengths as advisers? How long have they been investing in property and how well are their portfolios doing?
- Are they taking their own advice? Does your advisor put his money where his mouth is or are you being sent out there into the market on your own? At his keynote presentation, Lewis Donaldson, reminded us that many real estate agents selling investment properties do not invest in properties themselves. In fact, many know very little about the differences between a good home and a good investment property.
- Consider the source of published surveys and statistics. Investors value certainty above all else. But investment by virtue is an art of predicting the future and hedging your bet, which is probably why most investors keep a close eye on published studies, surveys, and statistics. While hard numbers can help you understand the present and foretell the future, it is important to understand the motivations behind their publication. For example, a real estate agency that is eager to attract more investors to buy its excessive housing stock is more likely to point to figures that support the suggestion that it is a good time to be buying investment properties.
- What is the nature of your relationship with your adviser? Listen carefully to the language of your adviser. Does she talk about about the future at all? Does she ask you questions about your short- and long-term goals? Is she more focused on one single deal or does she talk about investment in a more generic term? Advisers who are fixated on one single deal may be good for just that one deal but they may not have the resources, expertise, or even interest, in advising you in the long term.
The danger of bad advice only manifests itself when the market collapses which is when many of us will be well past the point of no return. Or as Warren Buffett so eloquently put it, ‘Only when the tide goes out do you discover who has been swimming naked.’ Take advantage of the strong market force right now and empower yourself with the right advisers who will properly support your investment endeavours.
What are some of the strategies you use when you evaluate a property adviser? Share your thoughts below.