The 7 “deadly sins” of investing in property (article 4 of 4)

Private Property South Africa
Anton de Leeuw

Many investors will take shortcuts in their investment processes in order to maximise their profits. Instead of working with a reputable company like YDL Property Investment, inexperienced investors may elect to appoint local brokers in their chosen countries of investment.

Buying through brokers who are only interested in their commission and are not fully transparent

Most broker sales models are simply not investor-centric. 99% of foreign investors in the US are buying properties that are being flipped at a profit. The seller naturally wants to sell for the highest possible price, and unsuspecting buyers – not having local knowledge – often end up paying far above market value.

Investment brokers earn a percentage of the sales price. The higher the sale price, the higher their commission. The brokers will thus never truly have your best interests at heart because they are incentivised to sell at the highest prices.

As a result, working through brokers can end up costing a lot more.

Not understanding what “market value” is – particularly in a distressed market

Some investors buy through normal sales agents. The problem is that they too are incentivised by a commission linked to the sales price. And, they typically don’t think like investors, which could undermine the performance of your investment. Check the people you are buying from – they must have investor-buyer qualifications.

To highlight the difference between investor and sales agent thinking: If the sales agents know the area, they’ll often quote the ‘pre-crash’ property price to interested investors. If the property was valued at $250 000 before the global economic crisis, and the property can now be purchased for $90 000, the sales agent may boast about a 64% discount.

Unfortunately, the property bubble has burst, and today’s market values have no correlation to pre-crash prices. A far better indicator of potential returns is the replacement value of the property. ‘What is the property worth in today’s market?’ is the only question that is relevant.

YDL Property Investment’s investor-centric model

In contrast to models incentivised by the purchase price, YDL Property Investment’s model is truly investor-centric. YDL Property Investment is a buyer’s agent, not a seller’s broker, meaning that properties are purchased directly from distressed sellers, and at the lowest possible price for a flat, transparent fee.

In fact, YDL Property Investment’s model is totally transparent – clients know exactly how every cent is spent.

YDL Property Investment performs the entire purchase process on behalf of the investor for a flat fee, irrespective of the purchase price of the property. The service provided includes setting up the appropriate structures in the US in order to enable the property purchase. It extends right the way through assisting clients with finding the property that suits their investment needs, setting up the requisite tax structures in the US and other similar, yet essential, services.

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