Concerns about broker

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From: Pamela Fransen-Taylor


Hi All

I have just joined the Forum and have found the threads I have read so far, to be very valuable.

As such I am hoping some of you can give me some feedback on the following:

I was recently phoned (cold call) from a company claiming to be a "independent of any bank or financial institution".

To cut a long story short we (my husband and I) had them around to discuss our financial plans and they suggested we refinance our home with a LOC loan, at the same time buying an IP with an interest only loan. In sum, using the income from the IP and negative gearing, to pay off our home in a relatively short period of time.

In theory it sounded terrific and we agreed to take the next step and meet with a "complementary business" ie real estate agent/broker - we haven't yet met.

I had a call from the "agent" today to confirm our pick up time and I asked what the day would include. After being told we would look at several properties they said we would then be meeting with the solicitors to sign the contracts.

So now a little voice in the back of my head is screaming "HOLD ON A MINUTE!"

Please tell me that no-one signs up to buy an IP without getting a building inspection and independent property valuation first.

I think its time to put the breaks on with regard to the current brokers but don't want to drop the ball in terms of investing in property all together.

Surely the brokers wanting to organize our refinancing are getting a kick back on our purchasing a property.

Have other people had similar experiences?

What should we do - call it off?

Thanks
Pamela
 
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Reply: 1
From: Paul Zagoridis


That little voice is right.

Never sign a contract as a beginner on the day you inspect the property. Especially if it comes about as a result of a marketing effort in your home.

The commissions should be significant to the broker to justify the cold call followed by the in-home presentation.

This forum is very useful in identifying what you want to do. IP is very profitable to you when done right.

Regards

Dreamspinner
 
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Reply: 2
From: The Wife


Pamela,

Welcome to the forum!


You shouldn't be taking financial planning advice from a broker.

TW
~Life is a daring adventure, or nothing at all~
 
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Reply: 1.1
From: Mojo Jojo


Have had a very similar experience. Got a cold call from a large company that comprised a financial advisary dept, finance dept, property dept, stock market dept, etc.
Sat with the financial planner who told me I was right in looking at IPs and that I should speak to their property guy. The property guy spoke to me about a couple of properties but they didn't sound like very good investments.

As we were leaving he mentioned another property in a much better location. We drove past the property and saw a sign on it for the local real estate agent. Gave the agent a call and was quoted $25,000 less for the same apartment. Not hard to guess who we bought the property from.

The figures are going to look good but we've been to a number of these companies and each time we've been glad we've walked away in the end. We've always had a policy that we never sign the same day. You will be told there are other people lining up to buy and that if you put things off, things will only get more expensive.

I would suggest you have a listen to what they say but don't sign anything until you've had a think about it.
 
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Reply: 2.1
From: Pamela Fransen-Taylor


Before we met this group (the broker) we didn't know whether they were brokers or financial planners.

They are marketing themselves as a "one-stop shop" whose mission is to help as many Australians as possible gain financial independence.

Their actions to date are what have lead me to believe they are in fact a broker.

Can there be a "one-stop shop" in financial investment.

We are Sydney based. Can anyone recommend a good financial advisor for "small fish".

Until now I have always done our tax returns - and claimed nothing back! If we are going to make the most of investing we are also going to need help in this area. Recommendations for a good tax account would also be greatly appreciated.

Thanks
P
 
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Reply: 3
From: Rolf Latham


Hi Pamela

Bugger the numbers, its crucial you trust your gut feel. If it does not feel right, put it off, the "bargain of a lifetime will still be there tomorrow and next month.

Regards
Rolf
 
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Reply: 4
From: Michael Yardney


Pamela
You have been very sensible. Even though the concept of using the equity in your home to purchase an investment property is sound, the problem is which property.
I feel you have to do your homework and become an expert on property in your little "comfort zone."
Get to know an area of the property market like the back of your hand. Then you will know property prices and rentals and you will be able to recognise a bargain when you see one.
What type of properties were these people offering you? Were they from their stock of developments or were they established houses? Are these brokers (?) really independent agents or are they only selling their products.
Keep looking and learning
Michael Yardney
Metropole Properties
 
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Reply: 2.1.1
From: Mike .


Open file attachment for message. I've done this because cut and paste loses html code of original. Any suggestions to prevent loss of html code when posting original would be welcome, thanks. Mike
 
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Reply: 2.1.2
From: Pierre .


Pamela,

The 'as many Australians as possible' gaining financial independence from their aggressive marketing schemes will be the owners, directors, shareholders and maybe employees of their company. I suspect just about all their clients will be fleeced of their money, and will in fact be put on track towards a 'snake' on the snakes and ladders road to wealth.

Be afraid. Be very afraid. Do your own research. Take a month to read every post on this forum and in the archives. Read lots of books. Get out and learn your local area. Inspect at least 100 houses. Then go ahead and buy. If you do all of the above, you will be far better off. You will be able to spot a good deal immediately. You will be able to buy well and will be able to repeat the process again much faster - thus accelerating your path to wealth.

So endeth the sermon.
 
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Reply: 2.1.1.1
From: Pamela Fransen-Taylor


Thanks for this great example.

When I asked for a good tax accountant it wasn't so much because I can't do the sums as I assume a good TA is keeping up to date with changes in legislation, tax rulings etc.

I am very keen on property but have recently bought a small shares interest and want to make sure I do the right things with regard to all types of investment.

Thanks
 
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Reply: 4.1
From: Pamela Fransen-Taylor


Hi Michael

While we haven't yet looked at any properties it is my understanding that they are new developments. As they are suggesting we could only safely borrower enough for an IP up to $235,000 in value the broker has suggested Brisbane.

Being from Sydney I am quite nervous about that. I know I can't let my heart rule when choosing to purchase an IP but your comment about "getting to know an area like the back of your hand" makes me think I should stick to something closer to home. After all I have at least looked for property in Sydney before.

We are meant to be having a look at properties on the Central Coast this weekend. Again they are talking new (town houses I think - otherwise units)

From what I have read in the past week, I no longer think that "brand new" is best for us.

My father was a builder and is available to give us advise with regard to renovating for capital gain so why, as John Fitzgerald pointed out in his book, 7 steps to wealth, would I pay for a IP that is 10% land value and 90% depreciating asset!

PFT
"Getting Wiser!"
 
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Reply: 4.1.1
From: Terry Avery


Hi Pam,

Who told you could only safely borrow up to $235,000, your banker, the
market company or your mortgage broker?

I would suggest that if it is the mortgage broker then you may well be
limited because when they add in their cut people generally pay above market
value and therefore have reduced their own equity. You then have to wait for
a longer time to build up enough equity to borrow for the next one. This
slows down your wealth building process.

Cheers

Terry
 
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Reply: 4.1.1.1
From: Pamela Fransen-Taylor


Hi Terry

The broker gave us that figure. They were initially talking about $300,000. We are looking to roll our car loan and some other commitments into the refinancing. I guess the valuation of our own home didn't come out as well as they had first thought.

We wanted to base our borrowing on a conservative valuation of our home to avoid getting caught out. I am happy with the figure of $235,000.

My problem now is, if I can't buy in Sydney - How do I get to know another market from an "arms length" distance?

I certainly don't trust the market people the brokers put us in contact with. Having said I wouldn't be visiting the lawyers on the same day as looking at the property and that I would be getting a building inspection before making a decision about the properties they were going to show us on the Central Coast today, they simply didn't show up this morning! Guess I spelt trouble!

Pamela
 
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Reply: 4.1.1.1.1
From: Paul Zagoridis


I think Terry's point is that the marketer's broker has to sacrifice more of your equity to get the deal to stack up.

Get an good independent broker (there are some known in this forum). They will make sure you maximise the use of your equity.

Regards

Dreamspinner
 
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Reply: 4.1.1.2
From: Rolf Latham


Hi Terry

I object to this generalisation, hugely !

In 99 % of cases this is NOT true, most brokers do not charge brokerage and have NO involvement in the real estate side of the deal.

If they do they are by definition not an independent broker !



Rolf
 
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Reply: 4.1.1.2.1
From: Victor Mann


Most brokers are not Financial planners and are not allowed by law to provide financial advise. They are only meant to provide advise on loan products and the cost involved. Be wary of brokers that are tied up with a developer etc since there advice is often stacked. Get a broker that is independent of the developer and one that is recommended via someone that has used them before.
I am a broker myself and can provide you with names of top brokers in your area if you wish....(no kickbacks involved) And also u should ask the broker up front if he is getting any commissions from the developer...
 
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Re: Concerns about Big BBQ

Reply: 4.1.1.2.1.1
From: Gee Cee Cee


Email TW

For a invite to The Big BBQ 24/6/01 in Canberra.

You will meet so many experienced people that have been there done that and are doing it now Bigger & Better.

Real info & networking.


Gee Cee
 
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Reply: 4.1.1.2.2
From: Terry Avery


Rolf,

My sincere apologies, I didn't mean to type mortgage brokers but intended to
refer to the marketers. I will have to stop replying late at night.

Again my apologies for any slur.

Terry
 
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Reply: 4.1.1.2.2.1
From: Rolf Latham


Thats Cool Terry

I just get a bit (lot !) hot under the collar. Im not much good with generalisations.

Yes there are some out there that are "shady". Most brokers are very long term focussed which means they provide good client service at little at or no cost


Ta

Rolf
 
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