Hidden cost of units ?



From: Bydntsel .

Geday first time up.

Seen a lot of current unit developments high and low ( rise that is )

The sales people all say the same thing. This is what you should buy.

Strange that , considering their all different ( sales people & units )

Must be some good reasons for all of this positive thinking.

Questions that arise.

A. What is the commission they get?
B. What is the markup?
C. What profit dose the developer factor in?
D. What are the marketing costs?
E. How many doses the rental guarantee add?

I’m sure you could add to the list of Questions.

Any one out there like to ad to, or answer some.

Waiting with anticipation.


Follow your own advice
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Reply: 1
From: Dave :)

Hi Bydntsel

Sheesh...still not one reply!

I'm no expert here (especially on high-density, high-rise units) but generally:

1. The profit margin is quite high - developers/builders usually rely on a 20-25% ROI to make their project viable.

2. Sales people would get between 1-3% per sale.

3. Marketing costs vary greatly. It ranges from excessive marketing on TV, newspapers, internet and o/seas advertising to minimal - word of mouth/investor groups.

3. Rental guarantees should be looked at with suspicion. If one is being offered, you can bet your butt the promised high yield is already wacked onto the inflated prices. Rental guarantees, in my opinion, are proof that the developer is not confident of the rental demand for the units. They are there to (falsely) assure investors that there'll be no problems. To test just how genuine these guaranteed yields are, negotiate hard on the price, and get them to still offer the rental guarantee.

Just my 10c worth..



(used to want to be a Bruno Grollo...)
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Reply: 1.1
From: Bydntsel .

Thanks for the reply Dave.

I almost fell of the perch cos I was holding mi breath. ( We wont be doing that again )

The information is rather interesting.

It appears that if I were to purchase an IP for 400K, then used Henry K strategy = 20% discount ( negotiating with the developer ) The cost comes down to 320K.

Allow a further 1.5% discount, as the Sales people are not involved. Down to 315.8K

Discount 5% on advertising. Down to 314.221K

Could be I need some help at this stage, from people that have done this type of deal.

All contributions greatly received.


Follow your own advice
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