Property Investing – Tips on how to make a sensible decision

We know from decades of observation that most ADF members buy, or aspire to buy, property as a place to live or as a property investing or both. However, due to volatile interest rates, increasing purchase prices, inflation and economic uncertainty, it’s harder these days to get into the market and to stay there.

This certainly doesn’t mean you shouldn’t try. In fact, there’s a strong argument to be made that if property ownership is your objective, then borrowing money and getting into the market while you’re in the relatively secure employment position offered by the ADF can be a good time to do it.

Property promoters and lenders know that too, which is why we see a lot of property “specialists” targeting ADF members. Contrary to popular belief, lenders don’t wish to become the owners of houses and apartments as a result of defaulting borrowers. So a commercially sensible way to minimise defaults is to target borrowers with secure employment arrangements and a proven capacity to regularly and reliably repay loans, namely, ADF members and their families.

ADF members are, as a general rule, in a relatively positive position to realise their property ownership dreams. That’s why over the years, the Centre has produced a wealth of educational material on property investing, some of which can be found on our website.

In summary, here are some key considerations in making any significant investment decision, especially about property:

1) Never decide in the heat of the moment, especially at a property seminar or in the presence of an enthusiastic salesperson where the atmosphere is designed to be exciting and motivating and does not encourage rational thinking.

2) Before making a commitment from which you can’t back down, ask for a detailed written outline of the deal that’s being proposed, especially its income and expenses, both now and down the track for, say, at least 5 years (or the term of your loan, whichever is the greater). This should include all commissions and incentives to the promoter.

3) Consider your capacity to honour your repayment obligations should serious events occur, such as increases in interest rates, the loss of your or your partner’s employment, a career change or even the inability to retain a tenant. These are the “what if?” questions that might seem improbable at the time, but should be considered at the time when you’re making the initial decision.

4) Seek a second opinion, perhaps from a licensed financial adviser whose values and principles align with the ADF Financial Advice Referral Program. This will cost you money, but it’s likely to give you some assurance that you’re on the right (or wrong) track with your investment.

5) Check online reviews by other consumers. This is by no means a definitive basis on which to form an opinion, but it can be a factor in your “due diligence” of the deal. 

6) Check if the promoter’s name (or a company associated with the promoter) appears in:

• The Australian Securities and Investments Commission’s Connect professional registers (under “banned and disqualified”);
• The Australian Competition and Consumer Commission’s undertakings registers; and/or
• The website of your state’s or territory’s consumer protection agency.

7) Be a sceptical investor. Do not be a victim of FOMO (fear of missing out). One thing we can guarantee is that there will always be another property available (many others, in fact) when you’re ready to make a commitment.

8) Remember the golden rule of investing….if something looks too good to be true, it probably is.