Would you buy from an invester group or similar?

[tcocaro]

I am a property developer about to embark on a pre-sales marketing campaign for my latest development and was wondering about peoples view regarding buying from investor groups, financial advisors and/or mortgage brokers. In short would you buy from them? or have you in the past? Or whats your views in general.

In the past I have relied solely on real estate agencies and direct investment. Direct investment i.e. those investors who seem to keep buying from me over the years obviously yields the best outcome for both parties given I don't pay commissions and can provide the best discount upfront however as my projects get larger and more numerous I have sought to expand the approach to include the above mentioned groups.

My concern has always been based on the fact I have come across my fair share of inscrutable characters within these industries which has left me cautious and hence my question to the forum.

In short I am curious to know how many people here have purchased through an investor group, fin advisor or similar before.

If so what have been your experiences and would you recommend it to someone else.

Thanks in advance.

 

[Belu]

my issue when looking at those groups is:

- they charge a fee, which is obviously worked into the price
- their prices are usually inflated for the area and are aimed at inexperienced investors, and
- they lie

there is a development near me i was interested in, until the bottom price came in at $397,500 - well above what the area is currently worth.

when i said sorry but too expensive for me, they came out with the 6.5% rental guarantee and i was upfront and said "yes i read that which i assume is written into the price", "oh no" she said "these properties have the 6.5% because they are facing into another building" hmmm i thought "so they are the same price as the others, have no view hence have a disadvantage but are the same price? yes i think the rent guarantee for 2 years is built in...."

I really think it depends on how you sell it, how many units/apartments/houses are we talking here that you need to go to a syndicate or the like?

 

[josko]

Hi tc,

Personally I would not. I have not purchased through any of these groups as I do my own research etc, and I think you'll find most of us here do the same.
I have however purchased an OTP through a real estate Agent.

Your buyers are less experienced investors, who don't want to do the leg work.


Most of us here know that the price of marketing campaigns are factored into the sale of the development. We also know that the agents, advisors, brokers fees are also factored in. Personally, there will be no more OTP's for me. It was my first IP and my last OTP.

Good Luck with it all though.

Regards JO

 

[eternit]

I would buy from anyone as long as I can get an yield of 7.5%+ on a newish property

If you have any properties which meet my criteria, you could always message me

For me its not about who I am buying from, its about what I am buying and what it will give me in return

Oh and for an older type property I would be looking at a greater yield as their is extra money usually needed to be spent on the property from time to time.

 

[marg4000]

I would be reluctant to buy through an investor group as I know they add their fees into the price.

Then again, if it was the best valued property around then it would be different. But usually you have to pay "joining fees" of some description before you have the opportunity to research the property offered.

Hard to see how it would be good value.
Marg

 

[tcocaro]

Thanks for all your comments and I agree with them all however people still seem to buy via such avenues.

I am sure there are operators with thin margins who do operate in a professional manor problem is its hard to discern between the good and the bad from face value.

I understand that fees are built in however if done properly those fees can be the same or lower than fees a developer would otherwise have paid an agent.

In the end of the day not sure whats worse groups that charge you (although hidden) but actually present a unit/townhouse with 12 month settlement etc i.e. atleast get something tangible for your money compared to a seminar charging you 5k to tell you what to do and all you get is a shiny brochure.

Again there maybe (like everything) groups, fin advisors and seminars which are really good.

Regardless thanks for your comments, would still love to hear from anyone else that ran through the process.

 

[tcocaro]

Trust

another quick point I wanted to make is one of trust. For instance people for better or worse need to see a "circus" styled arrangement i.e. the glossy brochure, seminar, flashy suit and catchy phrases before they part with their money usually to their detriment.

This is unfortunate as I would love to be able to simply form a no frill investor group (as would most developers) to ONLY sell ones own off-the-plan discounted properties without an intermediary. The problem is "trust" no one out there would "trust" that the discount is an actual discount at all.

And given trust is built over time the last resort many of these groups take is to in effect "push" people into buying.

My hope is to find groups, advisors who have built trust of their clients over time. Somehow i think it'll be tough finding them.

 

[steveadl]

Thanks for all your comments and I agree with them all however people still seem to buy via such avenues.

Absolutely, but I think you'll find they tend to be less experienced and the ones that want their hand held. But I guess from your point of view, doesn't matter who it is that's buying them as long as they sell, and I don't mean that in a bad way TC. As you said, you're not trying to rip people off.

 

[Aimjoy]

Its a No vote from me - I wouldn't. Most (I dare to say) who post regularly here would not - we are a critical bunch (evaluating critically) when it comes to investing.

But this SS forum is probably not a representative sample of the herd of investors out there. You might sell via the channel you are considering and its worth a try I think.

 

[tcocaro]

I completely agree and I knew the negative response I would get from somersoft members given most have atleast bought once before.

The issue is there are people out there who (beleive it or not who dont know about somersoft ) and look to such groups for advice.

Problem is whenever you get inexperienced and vulnerable people you get also get other people wanting to take advantage of them.

I was just hoping someone here knew of someone with a positive experience or bad one.

In the end of the day i think its somewhat easy to spot out the "really" rouge players given the conversation will start with (can we have a separate deed of agreement with a rebate payable to account x in each contract)

thats when ill say.. ciao.

Absolutely, but I think you'll find they tend to be less experienced and the ones that want their hand held. But I guess from your point of view, doesn't matter who it is that's buying them as long as they sell, and I don't mean that in a bad way TC. As you said, you're not trying to rip people off.

 

[Player]

TC,

you could try targeting large sporting bodies such as the main football codes and find out where the mainstay of their financial advice comes from. Many in the AFL, for example, have advisors that help their clients (players) invest their takings so they have something to fall back on when their bodies finally give up.

Some would, I dare say, recommend house and land or townhouse/unit investments that tick all their boxes/criteria, along with managed funds wrap portfolios, listed trusts, etc.

Perhaps try and source out who provides these services to them.

Also, just adding as an after thought, perhaps target the sports managers and marketers of elite sports folk and they may be able to steer you to the financial providers..... thereby having an inroad that way and providing your product for a win:win outcome. Also perhaps provide depreciation schedules as a value add feature.

 

[The Y-man]

. In short would you buy from them? or have you in the past? Or whats your views in general.

Been there, got burnt!

Having said that, as a business, you need to consider the cost effectiveness of marketing through such groups - and I do believe they are effective (otherwise there wouldn't be so many of them around!!).

People love "one stop shops" - and property is seen (and myth propogated) as being "very complex" needing a huge number of professionals to "get it right".


Keep in mind to target

1. interstaters
2. overseas buyers
3. non-english speaking market

which are you prime candidates for overpa.... err.... paying a premium price for your developments.

Make sure the sales team have the correct language and cultural skills if targeting overseas and migrant markets - mandarin and cantonese is mandatory minimum if hitting HK, China, Taiwan, Malaysia and SG (to some extent). Advertise in Chinese papers in Australia - there are huge (cashed up) segments of society who read only these and not your "normal" tabloids (How do you think Westpoint got so big!).


I was also thinking if credit is tightening up, perhaps you can organise some sort of (vendor) financing deal - but then you could end up creating a whole subprime market all of your own!

 

[Rolf Latham]

It depends

In general no, but there are some very good small scale operators out there that make an ok living and dont load the price with a 40 k extra commish

ta
rolf

 

[Loki]

I did. They selling four units in one block. Bought all four. Said $20000 discount each unit. Discount from what? Don't know. Doesn't matter. (Does it?) Price seemed good, same, maybe better than others in same place.

Renovated all of them, spent something, maybe $60000 all up. Sold three when finished, put money back into loan on last one. Makes nice cashflow now. Maybe got ripped off. Don't think so. Still made profit.

 

[BayView]

Tcocaro,

if you were to consistently provide a good quality, good value product in your developments for a loyal group of individual investors, I for one would become one of those customers, and if you can gain the trust of a few of them, you wouldn't need to look for any new ones.

The benefit for you would be you would not need to spend a large amount on ads for buyers; you've already got them waiting.

To go through the investor clubs may gain you some new customers, but in business it is more expensive to acquire new customers than it is to keep existing customers.

When I started investing I attempted to get onside with a local well-known development company in the Mentone area, and tried to make them see that I would be a regular and reliable customer, and would be wanting to be looked after of course. Win-win for everyone so I thought, and I was ready to buy 2 townhouses off them straight away, off the plan, at a bit of a discount.

Judging by their body language, I think they probably thought I was a w@nking d*ckhead and made it clear they would rather just "test the market" with their developments, so they lost a potential ongoing customer for life.

 

[tcocaro]

I have some investors who keep buying but you have to remember many previous buyers are o/o. Further more the reasons to purchase previously may not translate to another site e.g. I have been developing in Canberra and now in Brisbane. Simply put there are some buyers who just dont want to buy outside their immediate area and so on.

The biggest problem is when you get larger and more numerous sites i.e. your previous pool of buyers becomes to small.

Not to mention there are only so many properties people can buy so the pool inevitably shrinks etc.

So although what your saying is 100% correct its harder to achieve in practice.

For instance MULTIPLEX has a very large group where they almost always achieve their pre-sale requirements. The group gets only a small discount but the benefits are somewhat pretty good e.g. last I heard when some famous group came round some gold members were flown in with the artist etc etc..

not sure if thats worth buying a property for but it makes you feel "special".

Regardless thanks for your points.

Tcocaro,

if you were to consistently provide a good quality, good value product in your developments for a loyal group of individual investors, I for one would become one of those customers, and if you can gain the trust of a few of them, you wouldn't need to look for any new ones.

The benefit for you would be you would not need to spend a large amount on ads for buyers; you've already got them waiting.

To go through the investor clubs may gain you some new customers, but in business it is more expensive to acquire new customers than it is to keep existing customers.

When I started investing I attempted to get onside with a local well-known development company in the Mentone area, and tried to make them see that I would be a regular and reliable customer, and would be wanting to be looked after of course. Win-win for everyone so I thought, and I was ready to buy 2 townhouses off them straight away, off the plan, at a bit of a discount.

Judging by their body language, I think they probably thought I was a w@nking d*ckhead and made it clear they would rather just "test the market" with their developments, so they lost a potential ongoing customer for life.

 

[WASP]

Does anyone here buy stock from developers or Off The Plan sales as part of their investing strategy?