Highlights of using a BA

Long time reader but only recently joined so I can post for the first time (and a long post at that!).

We have some investment properties locally but decided it was time to venture interstate (QLD) so used a Buyers agent for the first time. Below is a couple of highlights on my experience of seeking and using a buyers agent. Would be interested to hear if anyone else has a similar/different experience with their BA journey

Research

• Track record - alot of buyers agent were extremely hesitant when I asked for a list of properties they have bought! I asked for old (2yrs + is fine so they're not disclosing their current buying location and other IP), anonymous (remove address and even just state is fine), purchase price, yields and recent valuations (some BAs profess to do ongoing portfolio monitoring for their customers, so if thats the case, they should know what its worth now right?). Not sure why they are so spooked, maybe they have something to hide or they thought I was a competitor? The way I see it is if I am using a BA who professes to apply a particular investment philosophy, I expect to see a track record of that just like if I was buying a managed fund. Only a handful of BAs disclose some form of historicals (possible cherry picking of results but at least its better than nothing) and many others that went radio silent or refused to share any results. Will BAs ever be required to have the same level of disclosures as a managed fund in terms of historical performance? I can dream...
• Compliance - usual checks on their licensing (ASIC, external complaints resolution, real estate lic), Professional Indemnity Insurance, Relevant association membership (e.g. Rebaa and Pipa). For Rebaa and Pipa - still not entirely sure what weight this has on the individual operator (from what I can tell its mainly a form of self regulation via code of conduct), but its a step in the right direction in a generally under regulated area. Considering financial planners (which handle collectively more money than Real Estate / BAs) and they have only in the last few yrs done an overhaul of compensation etc, it may take awhile till the regulator acts properly in this area. I hope it will be soon!
• Investment Philosophy and Focus - I like to follow the BA's media and social media presence to understand their approach, activity and level transparency. E.g. some BAs do facebook live/video walkthroughs of properties they are purchasing (good for transparency). Others actively write articles/blogs on current trends/topics. I especially like reading through their historical articles, blogs, posts to see if their predictions/analysis still holds true after a few yrs, and if not why not. Ultimately, I seek those who practice what they preach, and its a set of values and logic that I can understand and agree with.

Finance

• My BA owns a mortgage broking arm aswell so I organised pre-approvals through them. Some warn these type of one-stop-shop is a no-no as its a conflict of interest (e.g. pushing you to go beyond your means etc). Personally I am comfortable with it as I do my own due-diligence on the loan and my cashflow. It also feels like a more streamlined process to have it done together with the property purchase and if anything went wrong I would have one point of contact. I'm sure if I had a good separate mortgage broker the process would've worked just as well.

Fees

• Signing up involved a small deposit (a couple hundred dollars), then 50% payments once loan is pre-approved, then rest upon settlement. Initially I thought progressive payments is a fair way for all parties involved. But after going through the process, I realised I felt pressured into accepting the property they offered as I had already made 50% of the payments at that point. I get that BAs need to protect themselves, but I will now think twice about a BA who wants significant payments prior to settlement. And this point has later played out below
• For the couple of BAs that I researched, fees seem to range from $8K - $15K, most seem to sit around the $10K mark

Signing up

• An initial financial assessment is done to ensure you can afford to buy a property and what your goals are to determine if you suit their investment philosophy. My BA's assessment was Ok but wasn't super thorough in terms of my goals. But then this BA buys to a very specific spec, so if you don't like the spec then this BA is not for you.
• A BA engagement contract is signed.
• Once loan pre-approval done, I was put on a waiting list and was told to expect the wait to be 4-6 wks before a property will be available for me. The wait ended up being 8.5 wks (ie 2.5wk delay) until a property was allocated to me.

Buying a property

• When I am close to the top of the waiting list, I get a location call to reveal the buying location, research on why this location is selected and the pictures of recent purchases. I was expecting a research pack showing all the data on why this location was picked (demographics, economy, infrastructure projects mentioned, all the metrics that fit their investment philosophy) but wasn't offered one (other than some historical purchases). Maybe I am expecting too much? But I guess regardless of what they say and show on glossy brochures, doing your own due diligence is still the most important aspect of this.
• Once the property was allocated to me, I get a property presentation call (60+ photos, no video or floor plans). During this property call, I found out it was one of the suburbs that I precisely wanted to avoid as it was built on a floodplain and coastal, which meant that it was subject to storm surges from the sea. BA said the property "is not in the 1 in 100yr flood projections" and "its a new suburb and they put in all these flood prevention measures". My day job happens to be in a related industry so I know the science behind the flood mappings and how human interventions (drainage, levees etc) can only delay, but do not prevent the inevitable. In fact, this suburb is typical irresponsible council / town planning - nothing should've been allowed to be built there, it should've been kept as a reserve to act as a natural buffer for more inland suburbs. Also, most insurance policies do not cover storm surges and even though insurance premiums are moderate now, its a fairly new suburb so once a big storm come through, you can bet that the premiums are going to skyrocket. So needless to say I was pretty upset at the BA, especially as I specifically said no flood zones in my brief to them when I signed up. I explained the above (which btw is researched based on all publicly available floodmaps from the council's website) and told them exactly what is an acceptable no-flood zone property. They came back with another property the next day that was within my criterias.
• So then I got a second property allocated to me and this one looked good. Contract was signed with an annexure that includes a variety of get-out clauses and conditions (e.g. early access to property for rental inspections/advertisements), deposit was paid and conveyancing, Build&Pest organised, property manager organised. This part has been pretty smooth
• B&P came back clear and I spoke to the guy doing the inspections and he was very professional and knowledgeable. Also gave some tips on future property maintenance which was appreciated. I wanted properties that needed non to very minimal work before it needs to be put on the rental mkt so I was not expecting anything major from the B&P
• The property management went so smoothly! The only thing I had to do was sign the management contract and approve the applicant. Was well informed of all the steps along the way, they also made suggestions on a couple of things along the way. So Easy! In addition I also called up the property manager just to have a chat to see what they were like (they were recommended by my BA). First open home was well attended and tenant secured immediately (which I think is a good sign their investment philosophy works) and they will move in day after I settle (talk about timing!).
• The property conveyancing is another slight disappointment (slight compared to the flood issue above) I have with my BA. This property is 4 y.o. so it would still fall under the builders warranty. Naturally then, I would expect the BA to recommend the Builders Warranty search to ensure the appropriate insurance is in place. I was not recommended this search but I asked for it to be done anyway, and of course it came back with an issue - there was no builders warranty insurance on this building! Granted, this property was presented really well and in good condition, B&P came back clean, its already 4y.o. so any building defects should show signs if it had any, the builder builds a large number of houses in the area and apparently all properties in the area has builders warranty insurance except this property (the BA told me that this was built by the owner for themselves so that may be why they don't have all the paperwork in order, but I have also found out that that its an offence from the builder to not have builders warranty insurance for a job this size!). When I asked my BA about it, they said this was not a search they usually recommend (why not I am not sure, its a new-ish property still within warranty?), and given the results of the search they asked me to talk to the laywers on the ramifications (which is fair enough as they're not legal experts). Besides this issue, the Lawyers / Conveyancing that the BA recommended was again very professional and good to work with.
• The BA I chose is a small operation (they have about half a dozen staff altogether across the property buying and mortgage business) so I do think there is single person dependency risk (e.g. if someone was sick or away, you just have to wait). However, they were generally very prompt, quick to rectify things, the owner is very involved and being small meant that they were very in-tune with what eachother was doing.

 

Great post

 

Thorough write up, thanks!

 

I have recently started listening to various property investment podcasts. Many agents come and share their stories. I find their stories genuine and transparent. Most of them are active property investors. They share their knowledge about certain markets and trends. I find these BAs are usually very active on other social media as well.

 

So the builder built his own place - it doesn't matter if it was SD a builder or owner builder but SD an OB, insurance needs to be effected for the balance of the warranty period if selling.

 

An update on builders warranty...
After some further digging by the lawyers, the other party finally produced the correct insurance paperwork. The mix up was because the insurance was against the lot before it was subdivided. It has now been updated with the correct current lot info.
Glad it worked out in the end (phew.....)
Will always get this check from now on for <7yo property purchases. i'm sure it would've taken me longer (and thats if i managed to find it at all) had i tried to find this info post settlement to make an insurance claim.

 

Thanks for the write up.

 

@Babesoft you and @Jose Eduardo Slompo are meant for each other
Thanks for your thorough write up. Great way to share back to the forum. Have been following Jose's thread and found many lessons and now your post has also got some learnings to take. Thanks again

 

Great post, @Babesoft, keep it up!

 

@teetotal This level of knowledge and detail is much better than mine! You can tell that @Babesoft is a seasoned investor just by the sheer amount of things he/she already knew beforehand. I'm just starting, still so much to learn!

Anyway, tks for following my thread!

 

I think you are taking it lightly what you have been offering to the forum and visitors of this forum.
Definitely experienced investors can teach us ins and outs. However sharing the whole process with everyone is also another way of teaching others.

 

Thanks everyone!
I've been a long time reader and have gained alot through this forum. Never found anything worthwhile to post until my recent BA experience so glad people are finding it useful.
And I have been following your thread @Jose Eduardo Slompo , great stuff, been waiting for your wkly updates

 

And a further update on my BA journey...

My house has just settled and I received a pleasant surprise. I recalled they mentioned this service before but I frankly did not pay much attention to it.

I got a follow-up email about something called "post-settlement property program". They will be CC'ed in on my rental statements and monitoring to ensure I am getting the maximum rent increases on lease renewals, routine inspections are conducted on a regular basis maintenance is attended to and we are receiving good communications from PM. They are also a general point of help/contact on the property management concerns and any legislative issues (which can vary by state) besides my PM.

Now as I mentioned this before, this is the first time I've used the BA and I've only just settled so words are cheap, haven't seen it in action yet, but I like what I see!

 

Tks @Babesoft, always glad to hear about people following my journey!

 

Great to see that you were active in the process, and took responsibility (realising it's your money!). I certainly agree that BAs are a great tool. Sometimes people take their eyes 'off the road' and the results aren't as expected.

 

Trustworthy BAs have nothing to hide. It's NOT about the location of the property. It's about a custom strategy that fits the buyer's personal circumstances! Your budget, your goals, your risk profile, your cashflow...

 

That's correct, but the devil is in the detail. I looked at the examples and I don't know any of these suburbs. Just my thoughts with regards to their acquisitions/examples

They provide Sales which is an estimate and the numbers may/may not be correct. Bank valuation may differ significantly?.

It would be great if they provided recent sales/comparable data. You wont know what you can achieve until its on the market and sold.

Built in equity? Fine, once again you wont know whether this is spot on or off.

This BA is also looking at the strategy of in built equity, tells me if you sell there is not enough fat in the deals. I could be wrong, but just my observation

 

The example you linked (which you've seem to have edited out?) is a good attempt at transparency. But case studies is not the same as track record, case studies are by definition chosen to present things in the best light.

To my BA's defense (and to an extent I suppose alot of other BAs as well), location is important in that you don't want to attract too much competition when you are still buying in an area. Hence, I think its reasonable for a BA to try and keep the location under wraps until the client is proven to be a serious buyer.

Agree with MTR it would be useful to show some form of mkt comparables. But I have yet to find one that does