Pitching to investors

That’s good news for brokers, as well as a signal to increase efforts to target and engage this vitally important sector.

Several factors are prompting investors – both the new and the more seasoned – to enter or re-enter the property market:

Australia continues to see significant population growth, creating high demand for housing. In addition, the undersupply of stock is increasing almost by the day, putting pressure both on house prices and rental rates.

Tim Lawless, RP Data’s research director, says rental growth during 2011 should return to its historic average of between 6 and 8 per cent, boosting rental yields and benefiting investors.

Hobart, Perth and Melbourne are likely to boast the highest gross rental yields this year, according to RP Data’s Housing Index, making them the best performing capital cities.

Outside the cities, South Hedland in Western Australia’s Pilbara represents the best value for the investor dollar. In 2010, the town recorded 11.9 per cent gross rental yield, and that figure is set to increase this year as the mining boom hits its stride.

“First home buyers have fallen back to about 15 per cent of the overall market,” Mr Lawless says. “That fall away is now being reflected in increased rental demand which is starting to cause rents to move upwards again.

“Investors will be the big winners in the property market in 2011.”

INVESTORS ARE GOOD FOR YOUR BUSINESS

Brokers, however, could also be big winners.

Investors made up around 35.5 per cent of all mortgages written by the Australian Finance Group’s broker partners, according to the aggregator’s December 2010 mortgage index.

That figure represents a slight increase from the 33.9 per cent recorded in December 2009. With demonstrably more activity in the investor sector, there is no better time for brokers to start targeting investor clients.

They know finance, are easy to deal with and are potentially very lucrative. Plus, they are frequently interested in more than one property transaction and are generally in for the long haul.

Andrew Mirams, managing director of Intuitive Finance, says investors will often refinance their owner occupier residence to access equity, effectively bringing two loans to their broker.

They can provide brokers with good repeat and referral business opportunities, he adds.

“Investors are financially savvy people,” Mr Mirams says. “They understand the industry and they understand the importance of privacy. They do not want to tell one broker their entire financial history or form a relationship with them only to start afresh with another broker three or five years down the track.”

SECURING YOUR INVESTOR CLIENTS

The best way to find and then secure investors as clients is to mix in their environment, say several of The Adviser’s elite business writers.

Before they put their money where their mouth is they will do their research, and savvy investors will attend workshops on property investment and wealth creation. These are a great way to target them early on in their journey.

“Roadshows and workshops offer brokers a plethora of business opportunities,” says Strategic Property Finance broker David Johnson. “When starting out, I always suggest brokers host a property seminar or put their hand up to be a keynote speaker at one.

“This will show potential investor clients you are a serious adviser who knows their craft.”

Positioning yourself as a professional and ensuring you have all the appropriate educational qualifications is crucial, he adds.

“Investors are looking for someone they can trust,” says Murray Cowan, managing director of Better Mortgage Management. “Someone to solve their problems, make the process easy and deliver quantifiable benefits – which in this case is helping the investor achieve their financial goals.”

Investors frequently need a faster decision than would a home buyer. They spot an opportunity, need to secure it quickly and expect the lender to deliver fast turnaround, time and time again.

Being familiar with the process, they also tend to be information hungry and expect regular updates. They do not expect to have to chase this information.

RETAINING THOSE CLIENTS

Once you have secured your investor clients, you need to ensure you use the tried and true methods to retain them, as you would with any other type of client.

Regular communications will help bed them down for the long haul, says WHO Finance’s Lee Dittmer.

“We send monthly newsletters, birthday cards, Christmas cards, gifts upon settlement and make quarterly calls to each and every client,” Ms Dittmer says.

Regular communication will keep you at the top of their mind when the time comes for them to buy another investment property as well as building a relationship based on trust, she adds.

More often than not, property investors are time-poor professionals.

They need to be confident their broker will find them the most suitable loan and that they will do the leg work to get it approved.

It boils down to professionalism: investors in particular have high expectations and to be successful, brokers must meet or exceed them.

GETTING REPEAT AND REFERRED BUSINESS

More than 90 per cent of Andrew Mirams’ investor clients have returned to use his services, while of that 90 per cent, more than half have given him referral opportunities.

“Almost 100 per cent of my referred business opportunities end up turning into deals,” Mr Mirams says. “Getting referred business from happy clients is the best referral a broker can get because the lead is warm.”

A majority of his referred business opportunities are also investor clients.

Investors frequently socialise and network with other investors, whether at a property investor road show or within their group of friends. So, it is fair to assume an investor would know and speak to others on the lookout for their next property.

Brokers should not, however, become complacent: “Don’t just expect your clients to pass on your name to their family and friends,” he says.

“At the end of the day, you have to roll up your sleeves and work for client referrals.”

Quality customer service should ensure one or two clients pass on your details, Mr Mirams adds, but it doesn’t hurt to ask your client for a referral.

“Those that do will receive more referrals than those that sit on their hands and rely on their skills to get them over the line,” he says. “As the old saying goes: you don’t ask, you don’t get.”

Investors should not mind passing on their broker’s details if they think their friends, family or colleagues would benefit from using them.

MEETING THE INVESTOR’S NEEDS

Like many would-be property buyers, investors understand the importance of having a good broker.

“For an investor, the finance is more than just a product transaction; it’s about implementing a strategy and a broker is crucial to this,” says AMP Banking’s head of sales and marketing Stephen Craig.

“Working with the investor’s other advisers, a broker can save them considerable time and money as the expert in product recommendation and selection.”

With a market packed with products from a wide range of lenders, a broker can take the guesswork out of the equation for the investor, narrowing down options, providing recommendations and, ultimately, implementing those recommendations.

Savvy investors understand this, so the broker’s expertise and knowledge are highly sought after.