Observations of a novice in the Wild West

Hi there

As I start my investment property journey I thought I might share a recap on my experiences. I'd be keen to know if this resonates as a fair observation of the makeup of the 'expert' market and how it interacts with potential investors, and would be keen to know if I have made a misstep or are towards the right track in my decisions about who to partner with or engage.

I won't go into specifics too much but, I'm working from a position of an existing investment with significant equity, modest positive cashflow and 7 years to run out, in my spouses name (low income), with myself earning into a higher tax bracket. We have a 50K+ deposit.

As I started googling and researching the ads and facebook links started flowing in... and in the mean time we started talking to some brokers as this seemed the right thing to do.

So, I've concluded that I started with the wrong end of the stick. Brokers would crunch my numbers and tell me what lenders would offer, with a summary of charges, but not really ask about my strategy or the real specifics of my goal. More just 'well it's time to get that loan to access your equity' - when there's still a ways to go for me to work out whether PPR or an investment is the right call in my circumstances.

So I take a breather and research and come across second group - ads for companies that offer subscriptions and clever negative gearing arrangements to give 'financial freedom' on OTP 'boutique' curated estate purchases, with no transparency on the business model... I start to back off on that...

Then I see groups that are all about property insights and market analysis, which seems great to access (the model for which I don't yet understand) but perhaps not the right first step if my position isn't clear... But then again, a useful service?

Then I'm finding groups that offer 'wrap around' services and advice, different configurations of free (to act as leads for there varied revenue sources e.g. agent, property manager, tax), or charged for strategic advice. I am exploring with interest as I start to realise all the types of skills needed to act wisely, but also realise that there isn't really a clear cut definition of how different service models work - e.g. do I go with a smaller alliance of experts, or some 'wealth' company? Does bigger scale mean better service? I'm a bit puzzled.

Then I realise that I've not even begun to ask the right questions about tax e.g. do I have a desire to increase pre-tax super contributions for the breaks, or increase partner contributions for govt benefits, and what is my long term goal? And how does this interact with property appetite?

Then, then, I realise I never had a clear strategy to start with that integrated tax, super, and investment objectives and figure I totally had the wrong end of the stick and I need some sense of this stuff to come into conversations with the wealth/investment alliance groups, and probably need some tax and super advice to inform this and not be subtly nudged into things for their benefit not mine.

So, I'm focused on clarifying my objectives, plan A and B etc, and long term wealth goals. As a position to look at strategies and then the envelope I want to invest with, then as a basis for looking at local markets with a level head.

In the meantime the brokers just want me to take out a loan and promise me there are major differences in products, but I'm not sure they cared to ask what I wanted to achieve in the first place. And I speak to friends who were buttered up into putting all their retirement funds into a SMSF 50% split into a OTP estate property.

So I'm wondering, if you've put up with the above...

Am I starting to come to the right perspective and place for making good decisions?

Is my characterisation of some of these groups and models fair?

Why is all of this so nebulous and strange to navigate?

Isn't there something structurally wrong that leaves people so open to being preyed upon to buy up services with closed eyes?

 

Am I starting to come to the right perspective and place for making good decisions?

Yes, your direction is correct.

Is my characterisation of some of these groups and models fair?

Yes.


Why is all of this so nebulous and strange to navigate?

So u want ways to make money handed over to you on silver platter? If it was that easy, everyone will be doing it. I am not being harsh but thats the reality of it.

Isn't there something structurally wrong that leaves people so open to being preyed upon to buy up services with closed eyes?

Ties into previous question. Its cruel world out there. They will prey upon you if you let them prey. Having said that, if you do your research, take care of risks, you will not be preyed upon. For e.g. during last mining boom, many companies were selling rental properties in mining town which were massively cashflow positive. Many did buy multiple properties.When downturn came, there were no tenants or rent came down crashing. People cant afford their repayment and many became bankrupt. Whom do you blame in this scenario? People selling properties or greedy investors who overcommitted thinking that they will get rich by buying multiple properties?


This forum is excellent source. If you ask question here, people will respond and people will guide you. But you need to tell them what is your goal that you want to achieve.

 

Thanks for the response.

Well yeah, I expect crooks and those who take advantage to be the natural order of things but really that was a question about regulation or lack thereof… I’m surprised that ASIC or similar don’t more actively work to deal with dodgy and non transparent business structures in this context.

 

Indeed, and put the brakes on that...

 

You have arrived here so I will concur you are on the right track.

 

I've been critical of brokers, but you can't blame the broker for not knowing your own strategy.
A good broker can be a great help, but you need to help yourself before others can help you.

So you need to know where you're going, brokers, accountants and lawyers can find a better route to get you there.
It may happen that you get to A and then decide you're in the wrong place and need to get to B.
Flexibility help a bit too.

Lots of great info around here.

 

A fair observation. I'd not been ready to turn my mind to this, and started on execution before strategy. I now know need to get my head clear first - whilst not falling into analysis paralysis. Up to now, my fears around property (and lack of job security) got in the way of even approaching the task. I certainly don't want to waste any ones time, including brokers, but perhaps that happens when you're unclear about the investment decision-making process and start at the end of the line.

It does feel to me that I'm experiencing the symptoms of a broader financial literacy issue in the community. e.g. just not understanding the benefits of certain debt arrangements, or the steps to walk through. Caveat Emptor I guess.