Why you shouldn’t listen to your family and friends when buying property

If you’re on the hunt for a property – particularly your first – it seems only natural to turn to family and friends for advice.

But while your nearest and dearest likely have your best interests at heart, experts warn there’s a real danger of blowing your money if you don’t seek a wider view.

Property adviser Christine Williams, director of Smarter Property Investing, says buyers should be wary of taking the advice of family members who have only ever bought one house, decades ago.

“Taking advice from someone, parents or anyone that’s only ever bought one property and that was a property for them to live in, that’s always a danger zone,” says Ms Williams.

Likewise, be careful of accepting well-meaning advice around the family barbecue.

“Someone mentions they’re buying a property and all of a sudden you get all the advisors under the sun putting their hands up … you know you shouldn’t buy in that area, there’s going to be a property bubble or you wouldn’t live there because of whatever, or that will never ever go up,” says Ms Williams.

“These people are listening to media that they might have heard the end of, or the middle of, and they haven’t actually researched the area or don’t understand what’s coming up (in terms of infrastructure projects).”

Ms Williams recommends listening to advice, but then researching it fully – and seeking the advice of experts.

David Johnston, managing director at financial services company Property Planning Australia, says there’s so much “noise” in the property industry that it can be hard to know who to turn to.

“The key is to find trusted experts and advisers (with no vested interest) who work in the professional day in and day out,” he says. “It’s very hard to be an expert at anything other than what you do for a living. Property and mortgage decisions are no different.”

He recommends listening to family and friends, but remembering that the market can rapidly change. It’s also important to remember that one buyer might have a different appetite for risk, or want different things from an area than another.

Mr Johnston says another approach, while developing your view on real estate, is to seek information that’s contrary to your view – just in case it’s right.

Property lecturer and author Peter Koulizos says family and friends’ points of view can be biased, based on their own experiences.

For example, an older person might think there’s only one way to deal with property: buy it, live in it, and pay it off as quickly as possible.

“Things are very different now. It’s a lot easier to borrow money, interest rates are lower and the deposit you require is smaller,” he says.

Likewise, your family might not think much of ‘rentvesting’: the idea of buying an investment property, but living elsewhere.

“The older generation would say that’s a bad thing and say ‘rent money is dead money, don’t do it’,” he says.

Mr Koulizos suggests arming yourself with as much information as possible. Start by researching online, speaking to experts or perhaps even attending property seminars (as long as they don’t cost thousands of dollars).

“Go to as many seminars as you can but just leave your checkbook at home, don’t buy anything at the seminar,” he warns.

Of course if your uncle is a builder or valuer, for example, they’re definitely worth talking to.

But otherwise, Mr Koulizos says, due diligence is key.

“Parents and friends are a great place to start, but you don’t finish there,” he says. “Take their advice with a pinch of salt and broaden your horizons.”

Source: Domain