Published on November 13, 2015

Property Sales Tricks

If you have met me or been reading my newsletters for even a short amount of time you would have heard me say that at MRD we want to partner with you.

Marriage is so much more than a one night stand or short term fling, and partnership is so much more than a transaction. It means sticking by you on your investment journey in the good times and the bad.

Did I say BAD? Yes I did and contrary to what many in the property industry would say, as an investor you will have bad times. It may be an issue with a ‘rogue’ tenant (albeit a rare occurrence) or as was the case after the GFC, a protracted time when your investment failed to perform as was intended. You may lose a job and have cash flow challenge. These are real life issues that people face and need to be supported through.

I see property investment as a business and MRD as your (property investment business) partner. STOP and re read what I just said there so that it sinks in.

A professional athlete performing at the elite level has a coach. Successful CEO’s have business mentors and as an investor wanting to achieve the very best success possible you ought to surround yourself with a team of experts who take the time to develop a relationship of mutual trust and respect, really get to know your goals and aspirations and are not afraid to tell you what you need to hear, rather than what you want to hear.

MRD Partners have a team of internal and external experts on hand to assist you with investment property research and selection, finance, superannuation (including self-managed superannuation funds [SMSF]), financial planning, income protection, life and other insurances and of course taxation and accounting.

Our commitment is that we will never interpret your thirst for knowledge as a licence to sell; so don’t be afraid to make contact and ask us questions.

Let me share some of the sales tricks that unfortunately many property investors fall victim to when dealing with people interested in their next property transaction.

Hype! Where unrealistic timeframes and outcomes of 'success' and 'wealth' are used to inflate someone’s expectations.

Targeting your emotions. This is where a slick salesperson uses tactics that pull on your heartstrings in unrealistic ways. We are emotional beings and being made to ‘feel’ the pain that awaits us if we fail to take action can be a necessary trigger to ensure that future pain is avoided; but seriously when I see or hear of someone having their emotions manipulated, it upsets me.

Retirement shortfalls. As with my comments above, a shortfall in retirement funding is a serious challenge that most working Australians face. That said, it is simply wrong to use this to manipulate someone into a property transaction that may not be in their best interest.

Cash flow positive. Based on what level of borrowings? and what weekly rent? At MRD we prepare a cash flow analysis report for clients and use 105% borrowings, all costs, exaggerate the interest rate and understate the weekly rent. Only then can you get a true snapshot of what a property will cost or put back into your pocket on a weekly basis. But markets change, as has been the case in the past couple of years. Take, for example the Brisbane market where there has been more construction and buyer activity; this has resulted in a corresponding drop in rents. The bottom line is that anybody acting like they have a crystal ball and are able to say with any degree of certainty what a market will exactly do into the future is less than honest.

You can afford it, it’s less than your coffee bill per week. Selling you an investment property on the basis of it costing less than your weekly cups of coffee is hardly a scientific approach to investing, or treating your investment properties like a business. Unreal weekly figures with no contingency for the unexpected is a recipe for disaster.

Your ‘lifestyle goals’. Any decent investment strategy should take your lifestyle goals into account, that’s not the issue. But again, as with previous comments, it is when those goals become the fodder for a slick salesperson to manipulate your emotions that you need to cut short any discussions or engagement with manipulators.

My goal is to help you build a property portfolio that will allow you to play more golf, travel or do other things with your time that you enjoy. You will never find me, however, using these things to have you make an emotional decision that is devoid of a clear understanding of outcomes and consequences.

Tax deductionsThe tax deductions owning investment property gives a property investor are great; no doubt about it. I am a big believer in structuring your investments effectively to deliver the maximum benefit to you the investor.

That said, I do not believe that investing in property should necessarily be the action taken by someone simply wanting to reduce taxes. So if you are ever speaking with someone who says "you’re paying way too much tax, you should buy a $600,000 investment property with our group and it will help you offset the amount of tax you pay" – show them the door; they are not professionals. This is a business remember and your decisions need to be better thought out.

Targeting high income workers. A single guy working in the mines and earning great money needs to be sober about worst case scenarios. He may marry and have children and give up his ‘fly in fly out’ (FIFO) work so as to settle into normal life with a family. What if the mining boom was to end and someone was retrenched (I say that tongue in cheek because it has already happened in a big way). His high income may be sort-term so responsible planning is essential.

It is the responsible use of the right kind of debt (i.e. productive debt) that can catapult your financial successes. While debt should not be feared it most definitely should be respected. If a salesperson is too quick to load you up with debt (not measured or considered); run!

Government incentives. The first home owners grant and investment property depreciation are not government incentives and sales people who refer to them as such, in my opinion, are trying to legitimise their activity and make you feel like the government sanctions the transaction they are wanting to push at you. If this happens, as above, you know what to do.

Fear of loss. Absolutely there are benefits in timing a market; getting in while it is in the recovery phase or the early stages of the growth phase. But when someone is pushing you into action on the basis that if you don’t act now you will miss out, know that this too is another manipulation tactic designed to get you to buy an investment property through them right now.

Growth suburbs, hotspots, boom locations. Be careful as media hype is not always accurate. Yes, you want to invest in well researched locations but all too often some small out in the middle of nowhere mining town is peddled as the place to be; but look what happened when the commodities' boom ended.

'Expertise'. For $800 and five days of training you too can become a certified real estate sales agent and call yourself an ‘expert’ but how much on the job experience would you have had? How many market cycles have you been through, both as a professional and an investor?

As I said at the outset, you will do well to surround yourself with a team of trusted experts that ‘have your back’; just know that not all who label themselves as experts are. In fact many who sell investment property don’t own any.

How can we assist you?

Do you have a property, finance, SMSF or insurance need right now? Perhaps you just have questions; either way, telephone us on 1300 883 854 or use the online contact us form and let us know how we can support you on your investment journey. Remember, we’re interested in a partnership, not merely a transaction.

Nick Lockhart
Partnering with you for your investment success