OD #13 - Why Most Property Buyers Fail (And How to Avoid Their Mistakes) - The Finance Bible

Episode Transcript
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SPEAKER_00 (00:00):
Most property buyers fail.

(00:01):
And the scary part is most ofthem don't even realize it until
it's too late.
They get emotionally attached toa property, they rush into
contracts, they overlook thefine print and end up with a
deal that costs them more thanit makes them.
Buying property isn't just aboutpicking the right house or unit.
It's about having a process, ateam, and the discipline to do

(00:21):
things properly.
The good news failure isavoidable.
If you know the right steps totake and surround yourself with
the right professionals, you canbuy with confidence and set
yourself up for a success.
In today's episode, I'll takeyou through the exact roadmap
that smart investors use, thesteps that separate the amateurs
from the pros.

(00:54):
Welcome back to another episodeof the Finance Bible Podcast.
Zeke here and your co-hostOscar.
But before we get into it,please note that nothing in this
podcast should ever beconsidered as personal financial
advice.
Of course, if that is what youare seeking, reach out, we'll
get you in touch with thecorrect professionals and get
the job done properly.

(01:15):
Sit back, relax, and enjoy theshow.
Let's get into it.
Welcome back to another episodeof the Finance Bible podcast.
As you just heard, today we'retalking about why most buyers
fail and how to actually avoidtheir mistakes.
So this is a bit of a short andsharp episode about what steps

(01:36):
to take once you've realized youwant to actually purchase an
investment property andrealistically how you can set
yourself up to put yourself inthe best position to achieve
success with property investing.
So step one is finance first.
It's as simple as that.
Before you even think aboutmaking an offer on a property,

(01:57):
you need to know exactly whatyou can borrow.
Too many people go shopping forproperty before they've actually
sorted out their finances, whichis literally like walking into a
store without knowing if yourcredit card is going to be
approved at the checkout.
You need to have all your ducksin a row.
So how you can do this is speakto a mortgage broker, figure out

(02:18):
what needs to be done to get youto your overall goal.
So I would suggest at leastthree to four months before you
actually look into purchasebecause that's kind of a sweet
spot in terms of timeline ofgetting your credit and check.
You might have a credit cardwhich you need to close.
That might take you a month toclose or two months.
So you can get that kind ofmoving.

(02:39):
You might have afterpaid debtyou need to pay off.
You might have to clean up yourtransactions.
You might be doing a bit ofonline gambling or you know, the
occasional gambling or justspending a bit of money out.
So three months gives you a bitof time to actually collect your
finances and make them lookattractive.
And your mortgage broker willconfirm this, but most lenders

(03:00):
look around two to three monthsanyway to make sure that
everything's up to scratch.
So you need to speak with yourmortgage broker.
They will help you understandyour borrowing capacity.
And ideally, they'll assist youwith getting a pre-approval in
place, which isn't vital, but ithelps.
And when you're putting an offerin and you're pre-approved, the
actual selling agent and thevendor, it looks a lot more

(03:22):
attractive to them when they'relooking at all the different
offers.
So if you did have apre-approval, you would be taken
more seriously because how itworks, it reduces the risk of
the deal falling over.
I've seen people put in offersbefore that were really excited,
and then all of a sudden theyhave the finance and the deal
fall over because their bankdidn't come through.
And in some cases, they evenrisked losing their deposit.

(03:46):
So that's not ideal.
Don't let that be you.
First step, always finance.
You can't purchase a propertywithout finance unless you've
got a whole lot of cash andyou're paying it outright.
But most of us need to getfinance from a bank.
So don't even think aboutlooking at properties before
you've got an idea of what youcan actually purchase.

(04:06):
Once you know what you canborrow, the next question is
simple.
How do you actually make anoffer that stacks up?
And that's where most buyersslip up.
Once you know your numbers, thenext step is making an offer
that protects you.
A lot of investors think it'sjust about offering the right
price and sometimes the highestprice, but that's only half the

(04:26):
battle.
The structure of your actualoffer matters just as much as
the actual offer itself.
Two most important clauses,which we speak to all our
clients about, including intheir offers, is the building
and pest inspection clause andthe finance clause.
So, firstly, with the financeclause, this gives you an exit
if your lender doesn't deliver.

(04:48):
So, generally speaking, youmight do subject to finance 21
days, and then you have 21 daysto get your finance in order for
the purchase.
On the other hand, you mighthave the building and pest
clause.
This ensures that you're notlocked into buying the property
with any major issues.
So let's say you do a buildingand pest inspection and they

(05:08):
come back with all these majorissues.
You've got, you know, heaps ofpests and termites damaging the
property.
You've got major structuraldamages on the property, you can
pull out of that house withoutgiving yourself a headache of
all the maintenance and all therepairs that you would have had
to do if you didn't have thatclause in and you're locked in
the property.

(05:29):
Without those two clauses, youare literally taking unnecessary
risks.
At the same time, your officestill needs to look attractive
to the seller.
So that's kind of wherebalancing it, the balancing act
of having the finance approved,but also having the building
pest clause there.
And if you don't have thebuilding pest clause there,
that's a risk you don't want totake.

(05:50):
But of course, a contract isonly as good as the people
reviewing it.
And this is where most buyerstry to cut corners, and that is
with their legal team.
With our clients, it is anecessity to have a good legal
team in the corner to revieweverything.
So a good conveyancer is thebackbone of your purchase,
literally.

(06:10):
They're the ones making sure thecontract of sale is actual
watertight, that the clausesyou've asked for are actually in
the contract itself, and nothingsneaky is hidden in the actual
contract.
So there people can miss things.
So you might request to a realestate agent to have various

(06:32):
amounts of things in thecontract or different clauses,
and sometimes they forget one ortwo or all of them.
And if you're just skimmingthrough that yourself, you might
miss a really important clause.
For example, the building pestinspection, and you might think
you've got that clause underyour belt, but as soon as you
sign the contract and you didn'treally read it fully, you could

(06:52):
be screwed.
So having a team that reviewsthe whole contract from start to
finish and makes sure thateverything lines up really puts
you in the right place.
Like I can tell you many horrorstories, which we've heard from
other buyers in the past whohave used themselves but also
the cheapest legal options theycould find.

(07:13):
And it doesn't really help them.
So spending a little bit more tohave a sharp legal team on your
side can literally save you tensof thousands of dollars down the
track.
If there's one place you don'twant to go bargain hunting, it
probably is with the legal andconveyancing team, because that
is the difference betweenpurchasing a property on a

(07:34):
really dodgy block of land in adodgy area with a dodgy
contract, or actually purchasinga property in a really good spot
with really good clauses andeverything is lined up
correctly.
And once the legal work isactually covered, the spotlight
then shifts to the propertyitself.
And this is where the buildingand pest inspection can make or
break the deal, which is youknow, step four.

(07:57):
We've already skipped, or we'vegone through step one, two, and
three.
And step four is the buildingand pest inspection.
So once your offer is accepted,it's time to bring in the
building and pest inspector.
So teams like Asset Road, wehave our preferred building and
pest inspectors across thecountry.
People we've used many timesbefore, they do a good job, they
get the job done properly, whichis the most important thing.

(08:18):
And this is where you speak tothese professionals, get them to
go into the property for you.
You don't go into the propertybecause you're not a building
and pest inspector professional.
You pay for a professional to goin for you.
This is where you find out ifthe property you're buying is a
solid investment or is it aticking time bomb that's going
to cost you thousands of dollarsjust in general maintenance to

(08:40):
get it up to living conditionsfor a tenant.
A professional inspector, theywill check the structural
integrity of the property, anywater damage, moisture,
electrical issues, etc., and themain one as well, the pests.
So the termites and any otherpests.
We've seen many times before,you know, both sides of this

(09:02):
play out.
One buyer we spoke to a fewyears ago, before they met us,
they skipped the inspectionfully of one of their previous
properties to save money.
And then six months later, theydiscovered really intense
termite damage and had to forkout, you know,$10,000,$20,000 in
repairs.
Compare that to another clientwho got a thorough inspection,

(09:24):
they discovered a bit of issuesin the roof and you know, a
couple minor defects, not major,just very, very minor, which
wouldn't cost much.
But with the right legal team ontheir side as well, they use
that building and pestinspection to negotiate around
15 grand off the purchase price.
So it's the same step, twocompletely different outcomes.

(09:45):
And it just shows you thatskipping the building and pest
inspection is never worth it.
It is the most important thingever, especially with older
properties.
When you're purchasingproperties in you know$500,000,
$600,000,$700,000 price point atthe moment, generally they are
older properties.
So most likely than not, you aredefinitely needing a building

(10:06):
pest inspection.
Assuming everything checks outand you are happy to proceed,
now it's all about preparing forthe settlement because that was
the last tick of your actualclauses.
And this is where theprofessionals who you've been
working from the start reallycome into it all.
So as settlement approaches, thedetails matter.

(10:29):
So step five is preparing forsettlement.
First, a team you're workingwith, or if you're doing it by
yourself, you need to organizeyour building insurance.
Lenders often require it and itprotects you from day one.
So it's in your best interest.
You need it.
It's like your health insurance,but it's for your new property.
You need your buildinginsurance.
Second, if you're buying aninvestment property, it's really

(10:52):
important, pending if it's avacant home or if it's already
tenanted, to get the advertisingunderway before settlement if
possible.
That way you can line up atenant to move in quickly and it
minimizes the vacancy period ofand the crossover.
Because there's there's manytimes where your property
settles, and then you might takeit two to three weeks to get the

(11:16):
actual marketing team and theproperty management team in
there to take photos andactually list the property, and
then another three to four weeksto get the tenant in there, then
all of a sudden you're coming upto two months without any
tenants.
So we need to make sure that thecrossover from settlement to the
actual tenancy is as short aspossible so that you're not left
high and dry without a tenantand cash flow issues.

(11:39):
So every day your property sitsempty is money out of your own
pocket.
So the pros always think ahead,and that's why you need to think
ahead because you are a pro.
Settlement is also where yourteam really shines.
If you do have the team in yourcorner, your conveyancer ensures
the contract is executedproperly.
They will make sure thatsettlement goes through with

(12:00):
their online PEXA.
Your mortgage broker, they'llfinalize the finances and let
you know what's happening inthat aspect of things.
And your property manager, who'snow your most important person,
they will hopefully line uptenants for you.
And by now you should have yourinsurance sorted as well.
So when everyone's on the samepage, settlement runs smoothly.

(12:21):
When they're not, it can turninto a nightmare if they're not
all across it.
So when you are looking, if youare looking to get involved with
like a team for this, generallyspeaking, if you speak to a you
know, our team, Asset Road, wehave our preferred conveyances,
accountants, mortgage brokers,solicitors, the building pest
inspectors, property managers,the list goes on.

(12:43):
So our whole team, we all knowwhat's going on.
So we work really smoothly.
But if you're doing it yourself,you you need to kind of align
everyone together, which can bea little bit difficult.
But as I mentioned, wheneveryone's on the same page,
it's a smooth process.
And finally, once the dust hassettled and the property is
finally yours, there's one laststep that separates the savvy

(13:05):
investors from the rest.
And this is what I call theicing on the cake.
So the tax advantages.
This is why a lot of Australiansinvest in property.
It's a depreciation schedule.
So this is prepared by aquantity surveyor, and they
outline exactly how much you canclaim in deductions on the
building and its fittings.
So simply, it's a legal way toput money back into your own

(13:27):
pocket at tax time.
With a brand new property, youcan claim up to 40 years worth
of depreciation on thatproperty.
If it's 20 years old, it's 20years on that property and so
on.
But a good depreciation schedulecan save you thousands of
dollars each year, and it'soften the difference between an
average return and a greatreturn.
So too many investors miss outon this because they simply

(13:50):
don't know it exists.
But yeah, think of it as icingon the cake, the final touch
that makes your investment evensweeter.
And the right team will organisethis for you.
So all you gotta do is sit back,relax, and you know, watch the
team after you're given the AOKand you put the offer in, you
know, watch them get it allsorted for you.

(14:11):
So, as I mentioned at the start,most buyers fail because they
treat property like atransaction and not a whole
process from start to finish.
They get emotional, which is thenumber one mistake in property
investment.
They rush things and they forgetthat it takes you know a whole
team to get it right.
The difference between failureand success is simple: a clear

(14:31):
process and the right people inyour corner.
So before you jump into yourfirst deal or your next deal,
make sure you slow down, youstop, and ask yourself: do you
want to gamble like most buyers,or do you want to actually play
it smart, avoid their mistakes,and buy property the right way?
The choice is yours.

(14:53):
We have the right team for you.
If you don't want to do ityourself, more than happy to
have a chat.
This is what separates youbetween smart investors and not
so smart investors.
So I hope this has helped you,and I'll see you all next time.
We hope you enjoyed the episode.
As always, we know exactly whatto do.
Hit that follow button,subscribe, whatever platform you

(15:13):
listen to this podcast on.
Also, share it to your friends,family, co workers, whoever you
think may benefit from.
Uh Fort 2014.

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OD #13 - Why Most Property Buyers Fail (And How to Avoid Their Mistakes)

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