Property is often the biggest investment many Australians will ever make, so why is it that so few people seek advice from the professionals before jumping in? Richard Sheppard examines the issue.
Each week, thousands of Australians commit to home and investment loans for large sums of money, often without understanding the risks and often missing huge opportunities in investment returns. However, when good advice is available for a fraction of the cost of the likely returns, why do so few people seek professional help?
These days, you can walk into a bank and request a $500,000 loan and be offered no advice, yet ask for a $10,000 term deposit or managed fund and you’ll be directed straight to a financial planner and given a product disclosure statement. The difference in return one property can provide compared to another property over time is extraordinary. Add to that the tax benefits and risks one strategy can offer compared to another and it’s almost criminal that professional advice on property investment is not more commonly used or mandated.
In the past eight years, Sydney property has had a measly 17 per cent total growth, while Darwin has grown by 102 percent – a massive 85 per cent difference. On a $500,000 property, that’s $425,000 more growth and equity. Even Canberra, the second worst performer, had 37 per cent growth – 20 per cent or $100,000 better than Sydney.
Add to this some common fundamental strategy and structure mistakes that can often cost tens, if not hundreds of thousands of dollars and it’s clear there is so much wasted opportunity that could have been prevented with some good and very affordable advice. So why is advice on property investment not more commonly used and made more readily available? The main reason is that property investment advice is not regulated in Australia.
This has left the door open for just about anyone to promote property labeled as a ‘good investment’ but it also limits the advice given by financial planners, who had all their other financial products regulated and integrated into their service and advice model during the Financial Services Reform Act more than a decade ago. This is the main reason most financial planners do not give advice on property.
Property is not defined as a financial product, and therefore does not have a product disclosure statement like managed funds and insurance, so it’s difficult for financial planners to advise on property without it compromising their compliance requirements. Thankfully, there are some excellent specialised property advisers, but they can be hard to find. If you are looking for good property advice, make sure you do your homework on potential advisers. Ask lots of questions about their experience and expertise as property is a large investment and the difference in results can be extraordinary.
Richard Sheppard is the managing director of inSynergy Property and Finance Solutions. inSynergy is a licensed investment property buyers’ agent that provides professional property investment advice, property market research and specialised mortgage broking services. Phone 1300 308 808 or visit insynergy.net.au