Property Investment is all about Return on Investment (ROI) but risks and the minimisation or mitigation of them is one of the keys to investing successfully.
I consider these two things when assessing the risk of an investment. It’s essential that you do this in order to avoid the effect of risks on your investment.
Risks should not stop you from investing, doing these two things before you buy a property investment will!
Hey guys, Property Search… Think Gladfish. I'm Brett Alegre-Wood, and this is Property Rant.
So today, it's actually…it's a fantastic question, but in very rarely or not enough does it get asked, and that is it seems too good to be true, but what are the risks?
So I'm going to deal with the risks first, then we'll steal with the “seems too good to be true.” Risks, they are part of any investment. And if you think, at any level, that investing, you're going to be able to blame somebody else, and if you go in thinking that, you're doing it totally wrong about. What you need to do, and when we talk about risks, there's, you know, what you're looking at is you're looking at how you're going to get return on investment. That's the first thing you should look at, because once you got… if there's no return in investment, there's no use in exploring the risks. So you look at your return on investment, make sure that's secure.
Check and double check, and that means due diligence, that means research, and I'll make the distinction in a second. Then what you do is once you know there's money in it, then you look at how you can either mitigate the risks, or remove them altogether.And that's the general process that you follow when it comes to risks. Risks are everywhere, and anyone who says they're not, anyone who says they're mitigated or got rid of them, you better check that claim massively, because see, what I look at, and this is how you should distinguish:
There's two sides to every investment, if you like. There is the due diligence and research which you have to take responsibility for doing, or get somebody independent of the commission and independent of the investment to look into it that you trust, that's competent, that potentially has PI insurance if they get it wrong, and all those things.
So really, the distinction here is whenever I'm listening to sales people, I'm looking at two things. I'm looking at are they giving me research due diligence? Are they giving me the sales spiel? Because look, I can make a turd in the desert look pretty investable, you know, given the right story, given the right platform, given the right branding and all this sort of stuff. And you'll find there's so many scams that happen that you look at them and go, “You know what? That's compelling.
I can see how I'm just getting catapulted into the investment, because it seems just so easy. And look, there's no risk in this risk that was there. That's taken away.” The story, and that happens all the time. Now, I'm not going to say…well, when I say all the time, it doesn't happen all the time. You'll find that probably, according to us, there's about 3% of deals go bad, about 3%, all right? Which it's unfortunate when they do, and yes, a lot of people's natural reaction is they want to blame, but the reality is the only person that can take responsibility is yourself. And that's why I really, really… I want to encourage you — do more research upfront than relying on anyone in the process.
Now, in terms of risks, I look at three different types of risks in any investment. So the first one is the property or the investment. So if we look at a property, that includes the area, that includes the development, the developer, so that includes the property, if you like. Now for a large degree, if the property's there, we can say it's a known quantity for most things. There's a few things in there, you know, damp may come out afterwards.
There's a few things we can't guard upon or we probably can guard upon, but then we should be, you know, we shouldn't have to rely or we shouldn't have to worry about that, or there's ways to mitigate that. So the property is the first thing. The second thing is the people, okay? So the mortgage brokers, the solicitors, the letting agents, the managing agents, the building management agents, if you like.
So all these people have been a part of your investment, because remember, this investment is not just talking about the investment before you buy, before you commit to it, but also after and the entire time of holding. So you're looking, upfront, before you make that decision for, potentially, 5 or 10 years of things that can happen.
So it's quite a responsibility. So we've got the property, we've got the people, and then finally is the deal. And the deal is where I see a lot of things go wrong. Now look, all three, I've seen things go wrong, but this is where I see so many people getting sold because there's a compelling story, because there's a glossy brochure, because it just seems too good to be true, people go for it. And because it's got a high return, 15%, you know, it's like, “Hold on. That's alarm bells ringing.” And if you're not sure, read my Ponzi, Scam, Bad Business book, which is on the website, downloadable free, because that's got stories in there, actual things that happen, all.
So people, sorry, people, property, and the deal. You've got to look at all those three things. Now, the key is take responsibility, spend the time upfront. If you do that, you will be rewarded by having an investment that doesn't fall over, that doesn't turn into a scam, a bad business model or Ponzi scheme. And you know, really, I can't stress this enough, if you're not going to do the due diligence and the research independently, and that means checking, re-checking everything that the sales or marketing spiel says, everything that it says on the brochure. If it says a 20-minute walk, go and… you don't have to walk it these days, use Google maps, or the little yellow man, get him to go for a walk, you know?
So these sort of things are in place, and you can do an amazing amount of research and due diligence from your home and from your computer. For what you can't, then you've got solicitors and brokers and various people on the way that you should be able to rely on, that have PI insurance, that have property regrowth schemes and ombudsmans and all these sort of things in place.
So the system is relatively good, but it is absolutely not good enough that you can avoid doing it, all right? Because you will lose, you know, not all the time, most of the time. By far, the most of the time, it will go perfectly. But the times it will lose, you potentially lose all of your investment, which you don't want.
So guys, have a great day. Live with passion.