Using a Buyer’s Agent to Purchase Investment Property

September 26th, 2017

Using an agent to help you sell your property is not an unusual concept, but a more recent player in the Australian real estate market has been the emergence of buyer’s agents. This guide looks at what they do, the advantages of using one and what to look for when engaging their services.

What does a buyer’s agent do?

Just as a seller’s agent devotes their time and resources to helping you sell your property for the best possible price, so a buyer’s agent is focused exclusively on helping you buy a property or properties for investment purposes.

Buyer’s agents normally offer two types of services. If you’re an investor who is time poor and possibly unfamiliar with the property market, they offer a full service including searching, evaluating, and negotiating the purchase of property on your behalf.

And if you have already found a property, but are not expert in the bargaining process, they also offer a negotiation service where they will help you obtain your chosen property at the best possible price, whether that involves negotiating with the vendor or their agent or bidding for you at auction.

Advantages of using a buyer’s agent

There are a number of reasons why a buyer’s agent is worth considering:

• They spend their time studying property markets around the country and are likely to have access to more data than the everyday investor.

• They do all the legwork for you, evaluating markets, identifying growth drivers and regions predicted to surge, locating suitable property, and negotiating a favourable price and contract conditions.
• They often have access to properties before they come on the market, allowing you to get in ahead of the competition and to off-market properties where the vendor needs a quick sale.
• They understand the auction process and the tricks of the trade and have the confidence and emotional detachment necessary for a successful bid.

What to look for when engaging a buyer’s agent

While using a buyer’s agent can save you time, money and stress, it’s important to make sure you hire the right one. When making your choice:

• Make sure they are licensed and have a successful track record of buying properties for satisfied clients.
• Make sure they are exclusively buyer’s agents and not selling agents as well, to ensure they are working solely on your behalf.
• Make sure they are not project marketers masquerading as buyer’s agents and earning a commission from a developer.
• Ideally, look for one who charges a set fee, because if they charge a percentage of the purchase price, this may provide a disincentive for negotiating the lowest possible price.

One of the best ways to find a good buyer’s agent is through word-of-mouth recommendations from friends and family or other investors who have used their services.

What buyer’s agents charge

The services of a buyer’s agent will vary from agent to agent, but this rough guide will give you an idea of what you might be up for:

• $1000+ to bid at an auction on your behalf.
• A flat fee or around 1% (plus GST) of the total purchase price to negotiate the price of a property.
• A flat fee or between 2% and 3% (plus GST) of the total purchase price if you use their full services.

Fees will depend on your budget, where you’re searching, the size of your portfolio and any additional requirements you may have, but many investors believe the advantages of using a buyer’s agent outweigh the costs. It’s also worth noting that the cost of using a buyer’s agent is normally tax-deductible when purchasing investment property.

Tips if going it alone

If you don’t have the budget for a buyer’s agent or think you have sufficient property smarts to go it alone, make sure you keep these tips in mind when searching, evaluating and negotiating for properties to include in your portfolio:

• Always put offers in writing – seller’s agents are legally required to present all offers to their clients, but if it’s not in writing, then it doesn’t legally exist.
• Leave emotion behind – never get emotionally attached to an investment property or you are buying for the wrong reasons. If you reveal an emotional reason for buying, a seller’s agent will use this to drive up the price.
• Be patient – if you feel uncertain, rushed or unprepared when considering a property, walk away and find another one. There will always be another property and your decisions need to be right.
• Be thorough – always have a contract checked by a solicitor or other professional before you sign it. There may be unfavourable clauses in it that could cost you money down the track.
• Make sure it fits your criteria – when searching for and evaluating potential investment properties, apply a predetermined set of criteria to ensure they will be attractive to tenants (i.e. proximity to CBD, schools, shopping centres, transport links etc).

Maximise your investment portfolio

Whether or not you choose to use the services of buyer’s agent to find the right investment properties for you, once you have acquired your portfolio, it’s important to make sure you maximise your investment.

Your investment properties should help you produce a sizeable capital gain in the future, benefit from negative gearing to reduce assessable income and enjoy various tax advantages. Obtaining a depreciation report from a quantity surveyor of qualified architect would ensure maximising this important entitlement and maintaining good records or delegating this task to a real estate agent may be advantageous to maximise the tax benefits of the investment.

As your career progresses, your financial needs will need to be revisited to adapt to your current situation and at MEDIQ, we provide our expertise in helping medical professionals understand strategies to structure their investment effectively, the available borrowing capacity, and the associated tax benefits. To find out more, contact us anytime at info@mediqfinancial.com.au or call 13000 MEDIQ (63347) to organise a personal consultation.