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Blue Chip investors have ignored 10 of the basic rules in residential property investment, according to Brent Smith, proprietor of Iron Bridge Real Estate. Smith is "distressed" at how normally sensible people could make such "irrational decisions with very large sums of money". He advocates the following non-negotiable rules: 1) Never buy investment property without seeing it.
2) Only buy from the builder directly or through a
licensed real estate agent.
3) Rental guarantees - are always, always in the price.
4) Never buy hotel rooms - have you ever seen any
market for second-hand hotel rooms.
5) Don't sign anything without independent legal advice.
6) Pay for your own valuation. Don't accept one supplied
from the builder or developer.
7) When buying off the plan, stick with brick and tile
freestanding houses or at least freehold townhouses.
8) Focus on three and four bedroom properties. That is
where you find long lasting rental appeal and resale
demand.
9) Always remain in control of your investment. Blue
Chip offered a tenant buyback option, but naive
investors seemed not to understand that a Blue Chip
subsidiary was actually the tenant.
10) Only appoint a property manager who:
a) Will provide a service guarantee.
b) Leases property (no periodic tenancies)
c) Accounts for the actual rent at least monthly from
an audited trust account.
d) Makes regular quarterly inspections with written
reports.
e) Allows cessation of management, with 30 days
notice from you.
Property Investor Magazine - March 08 |