Finding a good property to invest in requires solid quality research. Whilst fear and greed can influence share price movements, unfortunately, it is predominately the emotional connection that people have with property which frequently sways their investment decisions. As a high value single asset property comes with added risk so if the right property is not acquired the effect can be disastrous.
As a financial planner you can play a pivotal role in reining in your clients emotion in relation to property and in doing so become the go-to trusted person in a very valuable high demand asset class.
Why should you become engaged with real property as an asset class with your clients?
There are two answers to this question.
- Real estate agents are moving into financial planning as are mortgage finance brokers, just as accountants did before them and stockbrokers since. Robo advice may also impact on your business as it takes hold and then there’s technology you don’t yet know about.
- Your next generation of clients are the Gen Ys many of whom have already flagged their preference for property over equities – an asset they relate to and understand better. Recent research into Gen Ys shows they are buying their first investment property at an average age of 25. It was 35 for Gen Xers and 45 for baby boomers. Plenty has been written about the habits of Gen Y. They are a different generation in more ways than one. They know what they want, and how to get it and they embrace technology.
There is a strong message in those figures.
Including property in your service offer in some way has the potential to increase client reach and generate additional valuable revenue, because it’s an asset that breaches the age divide. We all live in a property and almost all of us work in one be it at home, in an office, factory, shop or on a farm, and everyone we know does the same.
How do you include property in your offer?
The benefits for advisers of including property are compelling; increase your fee basket, protect your clients from unscrupulous marketeers and protect the FUM in your business.
If your clients go outside your advice to buy an investment property this will surely reduce your FUM as they pull money out to put down a deposit. They will then be exposed to potentially poor properties, over-priced properties (commissions being built into price as well as rent guarantees) and possibly in areas with poor growth potential. There are even cases of people purchasing two or more properties in the same complex or street.
So, how do you include property? Unlisted trusts and REITS are one way if you want a pooled structure in commercial property and another classification of equities from listed REITs. However if you, or more importantly your clients, want residential property or property where they have a choice to participate in then you should consider the DomaCom fractional model.
The DomaCom Fund provides you with a property strategy as it is able to buy any property type in any geographic location in Australia. The Fund does all the due diligence work for you including legals, inspections, annual valuations and ongoing management.
But because it is a syndicate-like MIS you need to ensure enough people can be assembled to contribute to the purchase price which includes due diligence costs, buyers agent fees and stamp duty.
The DomaCom Fund is a specialist product that requires the adviser to be accredited to use it. Details are available along with further information on the DomaCom Fund and the fractional style of property investing at www.domacom.com.au
