UNLESS you’ve been living under a rock, you would surely have heard the revelations coming out of the banking royal commission largely relating to poor financial advice, which has detrimentally impacted many Australians.

Outside of these scandals being unearthed in this public forum, I’ve been incensed and shocked to see first-hand people receiving poor property investment advice by people who are largely unlicensed and with conflicts of interest.

Add to this the recent warning from the Real Estate Buyers Agents Association of Australia (REBAA) about double agents, with many real estate agencies extending their services from purely selling into buying, and it’s a becoming a real minefield for unsuspecting property investors.

What are the red flags?

A recent review by the Australian Securities and Investments Commission, which randomly looked at 250 files, found 91% of self-managed super funds were underpinned by poor financial advice, with the adviser failing to act in the best interest of their clients.

There has been massive growth in SMSFs, with many people choosing DIY super funds to get into the property market – and many setting up SMSFs simply to invest in property – but the review found there was an increasing use of ‘one-stop shops’ where the adviser was connected to a developer or real estate agent, and encouraged their clients to invest in their products. That is, they had a major conflict of interest.

In my experience the property being pushed by unscrupulous advisers is usually new property, as opposed to existing, and advisers are also pushing the depreciation angle to sell it to investors. Depreciation – on both capital or building allowances (applying to the structure) and plant and equipment (relating to removable items)- can be claimed by investors as a tax deduction. After recent changes to the rules, however, depreciation for plant and equipment can only be claimed as a deduction for new properties, with second-hand properties no longer eligible.

Since the rule change depreciation has become a greater selling point for new properties. But while the deductions can be lucrative, it is certainly not a major reason for buying an investment property – it is a tiny part of the puzzle in selecting the right asset for your portfolio. Indeed, other factors that impact demand and supply in a particular location, that will push up the value of your asset, are far more important considerations, but all too often people receiving advice about property are overlooking this.

New properties are being sold as the easy way to long-term wealth, without considering other factors, but there is actually often a stronger case for existing property.

Who can you trust for advice?

We could talk about the pitfalls for property investors in the financial advice sector until the cows come home, but let’s instead focus on where you should be getting advice about property.

Property investment advice is not currently regulated, despite a push to do so, so you need to be careful about where your getting advice from.

First and foremost you must only seek advice from someone who is licensed and completely independent. Some financial advisers are independent, and buyers’ agents who are members of REBAA are too.

When I say independent, I mean they must have no conflicts of interest, and must only be working for you, providing objective advice that is in your best interest. If the professional is getting paid by a party other than you, they will be acting out of self-interest.

While you will pay more for independent advice, it will save you money in the long run as the licensed, independent professional will be acting fully in your best interest, rather than working for you and another party, such as a developer that they’re getting a kickback from.

Exclusive Buyers’ Agents charge a fee for our service, which includes researching, analysing, selecting, inspecting and conducting due diligence and purchasing the best investment properties in Australia for our clients.

Our fee guarantees impartiality, as we work exclusively for and in the best interests of our clients, accepting no commissions from sellers, developers or project marketers. This is just one benefit of using an Exclusive Buyers’ Agent – for more click here.

The Edge Property Buyers is also a member of the REBBA and fully licensed in NSW and QLD, while many other professionals – such as those selling new property – do not need to be licensed.

Every investor also needs to have a strategy before buying property, rather than just blindly taking the advice of a so-called professional to buy a ‘great’ property. At the Edge Property Buyers, we have an 18-step process to ensure investors take the right steps in buying a property.

Doing individual research to back up the advice of a professional is also advisable, to give you confidence you’re making the right choices for your financial future.

Top tips:

• Find someone who is completely independent

• Choose a licensed professional

• Be prepared to pay a fee for long-term gain

• Back advice up with your own research

If you want independent advice on finding the right property in the right location, contact us for an obligation-free 30-minute strategy session. For guidance on where to start when it comes to property investing, subscribe to our six-part ‘Ready to Buy Checklist’.