The “Off Market” Hoax
You have saved hard and made many sacrifices over many years. At last you have been given approval from your financier to take the plunge into purchasing your first investment property; now for the exciting part, finding that perfect property.
You have been reading the real estate sections of the daily newspapers and have often noticed buyers’ advocates being quoted. Perhaps you should speak to a few; it doesn’t cost anything to have a chat. Besides they must be experts; they are often quoted in what appears to be reputable newspapers.
Your appointment is set and here you are speaking to two experienced buyers’ advocates. The interview is going well and they're asking you all the right questions. What’s your financial capacity? What are your expectations about property investing?
They explain to you their level of experience, many successes and how you will be soon financially independent.These two polished performers are going to take the time, worry and stress out of your property purchase.
According to them all you have to do is put your trust in them and you will be on a jet to your private island sipping Champagne surrounded by your many servants.
Then without warning they drop the deal-sealer.These two smooth operators will give you exclusive access to “off market opportunities”.
They explain to you how they have access to properties that constitute the optimum performing investment, properties that will double in value every 7 to 10 years, properties that if placed on the open market would attract multiple bidders, properties that any astute investor would love to have in their portfolio.
Wow! This is your lucky day, maybe they like your alluring smile, or maybe it’s your outfit or maybe you’re just special. Surely they couldn’t do this for everyone; you can’t believe your luck.
If placed on the open market these “off market opportunities” would be fought over by multiple buyers and result in a premium price. However the owners of these properties are going to sell them to you and only you and according to the friendly buyers’ advocates at under market value.
The reality is the claims made by many buyers’ advocates that a potential client will have exclusive access to investment grade property is a sham; a sham designed to suck you in to engaging their services and ultimately buying a dud property.
There is less than 5% of investment grade property on the market at any one time. Investment grade property is situated in the best streets and suburbs of inner Melbourne. Quality of location and streetscape are two high priority ingredients when it comes to premium grade investment property; there are many other important ingredients.
Investment grade property will always be strongly contested under auction conditions and achieve a premium price.
The fact is the greater majority of buyers who have been bluffed in to these “off market opportunities” are not buying true investment grade property. These lower quality purchases will underperform by many hundreds of thousands of dollars in the medium to long term.
The average first time investor is not aware of what criteria are necessary in order that a property produces the optimum capital growth. These unscrupulous operators will cite factors such as large floor and land areas, new kitchens and bathrooms and amenities such as gyms and swimming pools as features that will drive capital growth.
Unfortunately for the uninformed buyer these features are not high priorities that will produce the optimum capital growth.
The fact is if a vendor owns an optimum performing property they will not dispose of it via a buyers’ advocate. Quite obviously they will place it on the open market and let intense competition drive up the price.
The old saying “if something sounds too good to be true then it is” should be heeded when a buyers’ advocate offers you an “off market opportunity” that is presented as investment grade property.