Over 5,000 Investors Bought From Chris – WHY?
Posted On March 26, 2019
So why did over 5,000 people invest in real estate through Chris’s business?
Chris’s business did not operate the same way as other real estate businesses or agents did, and he was being attacked – supported by the newspapers – so, the question is why?
What it came down to is this: For starters, the properties Chris was selling were in the fastest growing region in Australia which meant finding tenants was easy. The next – and probably more compelling – reason was that although they could have found a cheaper property using the real estate agents, the properties from the agents were just not great investment properties, though they may be great to live in. Would you rather have
- A home purchased at $120,000 costing $150 per week
- A home purchased for $150,000 costing $20 per week
(Note also that the $120,000 home would also be worth $60,000 less than the $150,000 property if they both doubled in value over 10-years.)
The answer is clear as to why people chose to buy from Chris’s business. However, real estate agents need to learn how to sell investment properties rather than trying to ram the properties they have listed on an exclusive agency down investors’ throats. They were not selling them because they were great investment properties but because they were the properties they had on an exclusive agency. What happened to their fiduciary responsibility?
The real issue is that the purchase price is only one of the metrics to consider when buying investment properties. The newspapers used valuers of questionable accuracy and integrity such as Mr Herriot to show that people could buy properties for less through the local agents. It may be a coincidence, but those local agents just happened to use the newspapers in question to advertise their cheaper properties in. Perhaps I am just too cynical…
Anyway here is the real reason… Even if they bought a cheaper property, the purchase price alone was irrelevant because an older property would have more maintenance costs, be harder to rent, receive a lower rental income, have fewer tax deductions and so the investor’s costs were higher every week. Most people quickly realised that an extra $100 per week was not only unaffordable but after 4 years that was $20,000 extra and after 10 years you would be $60,000 worse off. That is the real reason they bought from Chris.
So what happened to the properties that were only costing $20 per week?
All of them more than doubled in value!