Brisbane buyer's agent - Scott McGeever

[Mike]

Hi Folks,

Back in January 2001 the first discussion about buyer's agents appeared on the Somersoft forum. Not a lot was known about them then and the overwhelming response by many of our members who participated in those discussions was largely negative. Some held the view that sourcing IPs should be done by the investor themselves. Others were skeptical that buyers agents would act independently of real estate agencies where much of their properties are sourced. These and other issues were hotly debated and those threads can be found in the archives if you want to research them.

Interestingly, since then, the buyer's agent industry has expanded around the country and, as far as I know, no scandals involving buyer's agents have been recorded. It seems to me that buyer's agents are slowly gaining acceptance by the investor community and we continue to see newbies on the Somersoft forum asking our members to recommend a buyer's agent in the area they want to source an IP. A recent example can be found at http://www.somersoft.com/forums/sho...=&threadid=7805

It is clear from the few responses so far that most of our members have not used a buyer's agent and wouldn't know where to look or who to contact if they ever considered using one. Currently the Somersoft forum is not very helpful to our newer members enquiring about buyer's agents because the knowledge base about buyer's agents is still limited.

It is for these reasons that I'd like to do a series of threads where a buyer's agent is invited to submit an example property purchase suitable for a property investor. This gives us an opportunity to meet some buyer's agents and get a feel for the area they operate in and the types of investment property that can be sourced in that area.

I have chosen to do the threads in the Information Resources forum instead of the Caveat Emptor forum because CE is for deals currently available. However, the purpose of the buyer's agent thread is to examine a past deal to help us understand the various criteria of suitable investment property and to compare that with our own notions of what criteria is important when choosing investment property. Everybody has different criteria for their current circumstances so this is also an opportunity to ask the buyer's agent whether the property you have in mind can be found in their region of activity.

It is now time to caution you that I will actively moderate this discussion to avoid it going off on tangents. If you keep your questions relevant to the example and property selection criteria or the buyer's agent's area of operation and local market conditions then we will end up with a very useful thread. If you need further information about the range of services and fees, most buyer's agents have an information pack that can be forwarded to you if you ask.

Now I'd like to introduce our first buyer's agent, Scott McGeever, who has generously agreed to be the first to try out this concept. Scott will reply with his example property deal soon. Scott is based in Red Hill which is less than 4 km from Brisbane CBD. See attached map. Scott is licensed with the Real Estate Institute of Queensland http://www.reiq.com.au/bin//FSMbr.e...113169&Id=23815 More about Scott can be found on his website at http://www.propertyresearch.com.au/who.htm#sm

Regards, Mike

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[ EDIT: moved image to photo gallery and replaced with image link - Sim' ]

 

[buyerforhire]

Thanks Mike for the intro. I would like to think I can learn from this experience as well as trying to help other people out with scenario's or questions they may have about property. I look forward to contributing when I can, if any of you want me to post examples relating to specific types of property (Positive Cashflow/Negative Cashflow etc etc) let me know.

Here we go.....

Recently we bought a canal front property for a Victorian investor on the Gold Coast, for the main reason of capital growth. Immediately when the GC is mentioned people start to shudder with the thoughts of two tier marketing and the like, and rightly so because it is still alive and kicking in a big way. We had searched for him for about 8 to 10 weeks, making offers on two previous properties, to find the illusive needle in the hay stack as the market is moving very quickly and it is hard to find a 'good buy'.

We managed to find a two level 12 year old four bedroom brick residence with three bathrooms and a double lock-up garage for $625,000. The house is situated on a block with approx 60 metres of canal frontage and faces north to water. The house is in good condition, albeit a few minor issues that were identified in the inspection process and the owner is undertaking to fix. We ended up offering and paying listing price as it was that undervalued it was not funny. The other major negative for the property is that the current tenant is paying less than market rent and they have a lease until September 2003. Even though it is under rented ($375pw), the price we paid outweighed the short fall.

We were hoping for a long settlement but the vendor wanted out and wanted it done in 30 days, when it all boiled down the price we were paying for it far outweighed the money that would be captured on a longer settlement, so we went with it. We made our contract subject to the usual tings and days after that they had had cash unconditional offers for the same price. As it was this agents policy to run with the offer they had received first, and because it was for asking price, we were in the box seat. It did take some time to get the vendors signature on the contract as he was somewhere in country Asia.

Needles to say everything went to plan and the property is now waiting to settle and out client is happy. If there is any sort of lesson to this scenario it is that if you know the market sometimes paying asking price can mean you secure a good buy! The selling agent told me the other day that if they had this property again they would list it for around $700,000, you can't beleive everything you hear, but my evidence suggests that is not far off the mark.

Regards,
Scott McGeever
property research - buyer's agent

 

[geoffw]

Scott,

What do you see the market rent to be?

 

[duncan_m]

Originally posted by buyerforhire

Regards,
Scott McGeever
property research - buyer's agent

Scott,

Are you an active property investor yourself?

Cheers, Duncan.

 

[buyerforhire]

geoffw

The market rent should be between $460-$480. As is the quandry for a lot of investors at present, prices have jumped (great for growth/equity) but it will take a little while before rents catch up, which makes it more costly to enter the market for new investors.


Duncan

Yes I do actively invest in property as well as shares, as I have always said spread your risk!

Scott.

 

[Mike]

Hi Scott,

Interesting example. Some questions I hope you can answer:

Is the investor planning to hold this property 10+ years or will he put it back on the market after a couple of years and take a profit? It is a lot of money to put into one deal when he could have diversified with a couple of properties.

I'm intrigued at the fact that you recognised that the property was undervalued straight away and that the selling agent seemed to acknowledge that by wanting a second go at $700,000. Did he blunder? Did you use sales comparables to establish the true market value? Do you think this type of property would have also appealed to homebuyers if it was marketed without a tenant? If so, should the vendor have waited to sell at the end of the lease?

Finally, could you also give us an overview of the territory you cover to find deals? Which suburbs to watch and which to avoid?

Regards, Mike

 

[buyerforhire]

Mike,

See reply to your questions below.....

Is the investor planning to hold this property 10+ years or will he put it back on the market after a couple of years and take a profit? It is a lot of money to put into one deal when he could have diversified with a couple of properties.

He is planning to keep it for at least five years, he has a real like for waterfront property and thus had to spend the dollars to acquire it. The strategy will be to realise a significant gain from the property within that time frame and maybe sell, or use the equity to invest elsewhere.

I'm intrigued at the fact that you recognised that the property was undervalued straight away and that the selling agent seemed to acknowledge that by wanting a second go at $700,000. Did he blunder? Did you use sales comparables to establish the true market value? Do you think this type of property would have also appealed to homebuyers if it was marketed without a tenant? If so, should the vendor have waited to sell at the end of the lease?

It was a situation where the vendor wanted to liquidate the property and wanted it settled within 30 days. As we immediately identified that it was undervalued by so much we offered asking price with a 90 day settlement, only later to find out about the 30 days or no deal! In the wash out it was such a good buy that it was worth just going for it. The agent was off the mark with pricing in the beginning, but after the flood of people came they realised the error and could of sold it 30 times over as I was lead to believe they received over 100 enquires on the property. We had been in this market segment looking for many weeks so all of our information (comparable sales) were known to our client and he also realised immediately what a good buy it was.

The property would have also appealed to an owner, so yes quiet possibly they should have waited until the lease finished, but time did not permit for the vendor.

Finally, could you also give us an overview of the territory you cover to find deals? Which suburbs to watch and which to avoid?

Ostensibly we cover within a 10km radius of the Brisbane CBD and any other areas near to water. These include the major parts of the Sunshine and Gold Coasts, Redcliffe Peninsula and Manly to the East of Brisbane. We will go further a field on special request. We think the eastern and southern areas of Brisbane are still somewhat undervalued, so they are the one's to keep an eye on. I would recommend always trying to buy in an established area so the scarcity of land equation is tipped more in your favour, as this should see capital growth accumulate faster. Brisbane has a situation where there is a lot of land around the outskirts still to be developed and if you have 15 to 20 years to wait for good growth that's fine but some people's circumstances do change and that is what you should be prepared for. For example, if you had to turn around within 3 years and sell your property will you get out of it without loosing any money, including all costs to purchase and sell? If you can confidently answer YES, then I would suggest you either bought well or in the right area.

Remember the above strategy is not something everyone would go for, but stick by it and property investing will never let you down. Hope this helps!

Regards, Scott.

 

[Mike]

Thanks Scott,

This deal was definitely a case of "preparedness meets opportunity". I doubt the interstate buyer could have acted so swiftly to secure this deal without the deep knowledge you had of the market values in the area. The early bird caught the worm.

These two issues ie market knowledge and ability to act swiftly ahead of the competition, are key concerns of interstate investors which have been expressed in many posts over the years such as this recent one:
Buying Interstate
http://www.somersoft.com/forums/showthread.php?s=&threadid=8002

Before I move on with another general question I'd just like to make a point about the vendor. He could have included a wider market for his property without a sitting tenant and, given that he was in a hurry to sell, would have ensured more competitive bidding and still sold in the 30 day time period. Given that the lease only had another 6 months to go, in my opinion it would have paid the vendor to pay out the contract ie $9,000 and relocate the tenant elsewhere. It would require the co-operation of the tenant, of course, but the chances are that he would have taken a $9,000 gift. The vendor could then have upped the listing price by $50,000 and still sold quickly.

Changing subject, Scott, I'm also interested in other types of property deals you may have seen on your rounds. As investors we are always looking to minimise our holding costs, if possible, but not at the expense of capital growth. Are you able to source dual occupancy potential blocks like that pictured below or large houses that can be converted temporarily to self-contained flatettes to improve yield and minimise holding costs?

Thanks for your input so far.

Regards, Mike

This property is in a prime location opposite Lofberg Oval, Swimming Pool and Bowling Cub and only a short stroll to village shops, schools and transport.

* Large LEVEL land 1,432sqm
* Wide street frontage 49.56 metres
* Possible dual occupancy, subject to council approval
* Excellent opportunity to build your dream home

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[ EDIT: moved image to photo gallery and replaced with image link - Sim' ]

 

[always_learning]

I called/emailed up a well known Sydney Buyers Agent ;PKproperty and asked basically if they could source a potential daul occupancy in upper north shore and was told bluntly to "forget@it". Which I assume means "we cannot be bothered".
So great differentiation question from Mike for Scott/Buyerforhire.

 

[buyerforhire]

Mike,

The short answer is yes, we do come accross dual and multiple occupancy properties in the market place from time to time. Some are good, very good in fact, and some not so good but if you look hard enough they are out there.

The important thing to watch with these properties is the public liability insurance and what you premium may be. At a first glance the property may look very attractive on a return vs. purchase price, but if you have to pay $10,000 per year on PL insurance the return will blow out.

Regards, Scott.

 

[Mike]

Thanks for that tip about PL insurance, Scott.

Since you brought it up I'll provide a few links for members to research. Obviously, a good insurance broker would help so these links will help to find one in your area:

National Insurance Broker Association - http://www.niba.com.au/niba/html/findabroker.cfm
Insurance Brokers Network Australia - http://www.ibna.com.au/html/select.cfm
Austbrokers - http://www.austbrokers.com.au/home_members.php
Steadfast - http://www.steadfast.com.au/html/localbroker.cfm

Some general reading about how to minimise premiums:

Changes in public liability insurance - a good Fact Sheet aimed at not-for-profit organisations but plenty of useful tips to limit insurance premiums.
http://www.ozco.gov.au/issues/publicliability/infosheet.htm

Need Help Getting Public Liability Insurance?
http://www.ica.com.au/hotissues/liabilityhelp.asp

Some specifics about what a policy may cover:

CONSTRUCTION & PUBLIC LIABILITY INSURANCE
http://www.ownerbuild.com.au/vic_liability.htm
http://www.buildsafe.com.au/l_ob.htm

A Broker Specialising in Property - Construction

Sarre Insurance Broking Services
VICTORIA PARK WA
08 93622166 [email protected]
http://www.sarreibs.com.au

Owner Builder Quote Calculator
http://www.sarreibs.com.au/prodserv_obi_calc.html

The Insurance Council of Australia has established a hotline to provide assistance to businesses and community organisations trying to obtain cover. Telephone: 1300 363 683 Website: http://www.iecltd.com.au

The General Insurance Enquiries and Complaints Scheme is a national Scheme for consumers aimed at resolving disputes between insureds and their insurance companies or claimants who have a dispute with another person's insurance company in relation to motor vehicle property (ie third party claim). The Scheme also provides free advice and information about any general insurance matter.

***************************************

Okay, one last question, Scott and I'll leave you in peace. We've looked at a couple of possibilities for investors. I'm sure there are others so can you give us some idea of the information you require from an investor client to confidently source appropriate properties. For example, if I said I'm looking for a cashflow neutral or positive property financed at 90% with above average growth potential for under $400,000. Is that helpful or not? Assume I have discussed my finances already with a mortgage broker and the strategy is to hold for 10 years.

Is there anything else you need to know and do you offer advice if the strategy is too ambitious?

Regards, Mike

 

[buyerforhire]

Question.......

Okay, one last question, Scott and I'll leave you in peace. We've looked at a couple of possibilities for investors. I'm sure there are others so can you give us some idea of the information you require from an investor client to confidently source appropriate properties. For example, if I said I'm looking for a cashflow neutral or positive property financed at 90% with above average growth potential for under $400,000. Is that helpful or not? Assume I have discussed my finances already with a mortgage broker and the strategy is to hold for 10 years.

Is there anything else you need to know and do you offer advice if the strategy is too ambitious?

Mike,

The info you have given above would be enough for us to go on, we would basically strategise with the client after they had signed with us what they would get and where they could get it. For example given the above I would be steering them towards a new or near new house on a small lot within 7/10km from Brisbane CBD, close to amenities, quiet area, close to transport etc etc.

This would have good rentability with the above attributes as well as being new or near to it the depreciation would pick up any short fall in rent to possibly give you a positive cash flow. The fact that you are buying a house and land would provide the above average potential for growth, as opposed to a unit or strata property.

Some of our clients give us as little info as above and some go into great detail in what they want. We do not mind either way so long as they have some flexibility. People must remember that a buyer's agent should work exclusively for YOU the buyer and to do that you will have to pay them. This is the only way you can ensure totally unbias information and representation in a property transaction.

A lot of people involved in this fourm appear very adept when it comes to researching and analysing property and they may have a lot of time, so they probably do not need a buyer's agent. Our clients come from people who either do not have the time or can see the benefit/added value in hiring a professional to manage the property purchase event.

Sorry for rambling on.............Regards, Scott

 

[Mike]

Thanks Scott for coming on the forum and giving us a good idea of some of the opportunities available in Brisbane. Many people on the forum have expressed a desire to do their own due diligence and property sourcing, however, I can't help but think that for interstate buyers or people who work full-time or investors looking for difficult to find property like large blocks with subdivision or dual occupancy potential, having someone constantly scrutinizing the market would be an advantage.

All the best.

Regards, Mike

 

[geoffw]

It was interesting to read the article on Buyers' Agents in the current API magazine- particularly to read Scott's contributions (and also to see what he looks like!)

 

[buyerforhire]

You can also see my ugly mug on our web site.


www.propertyresearch.com.au

As interesting scenarios come up I will post them to this fourm for comment and questions. Likewise if anyone has a deal in and around Southeast Queensland that they would like discussed here I would be happy to comment, very loosely of course!

Regards, Scott.

 

[Iggy_Type_R]

Hi Scott,

Another small question if I may?

Do you think that a buyer's agent be suitable for requirements like an apartment building of 20-40 units? (Not just in QLD area)

Thanks!

 

[buyerforhire]

I suspect you mean, Would it be beneficial using a buyer's agent to source an apartment in a building of say 20 to 40 units?

This would depend on time you have to look, it would be beneficial firstly with a new apartment as a buyers agent can sometimes get extra things added in at no extra cost through negotiations like white goods, furniture etc etc. They can also negotiate the asking price down on some off the plan projects.

With older second hand apartments their is an obvious benefit through market knowledge and having someone doing all the leg work.

Hope this helps!

Scott.

 

[Iggy_Type_R]

Sorry for not being clear with my initial post, no I mean buying an entire block of 20-40 units (not a single unit).

 

[Bear924]

Iggy,

I'd imagine that if someone was in a position to be able to purchase a 20 unit block of units they would have enough knowledge not to need a buyers agent.

If they didn't have that knowledge... only the money I'd suggest they spend some of the $$$ for the info...... regardless of how good a buyers agent was I wouldn't like to say "Here is $XXXXXX, go and buy me a 20 unit block of units" without doing a large degree of due dilegence.

 

[buyerforhire]

Ok, now I am with you.......My thoughts are that you would need a certain type of person to be able to help you, not just any buyer's agent. The buyer's agent could help you in the sourcing of the property, but may lack the necessary knowledge of the market segment you are looking at.

Looking at blocks of units that large would rquire a certain skill level that a buyer's agent dealing mainly in single house residential real estate may not be able to provide. I would suggest that you ask them some questions to ascertain their level of knowledge in the market for that type of property before you engage them.

Other than someone with extensive experience in dealing with a property like you mention a property valuer would probably be most suited to a job like this. They will have knowledge on yeilds, value of each unit separately, the surrounding market etc etc.

Hope I have answered your question.

Scott.