When purchasing an investment property, several factors determine whether your venture will yield the promised returns. It’s crucial to analyze these elements thoroughly before committing. Here’s a guide to understanding the key “fingers in the property pie” and ensuring you’re making informed decisions.
How many fingers are in the pie when you buy an investment property
When purchasing an investment property, several factors determine whether your venture will yield the promised returns. It’s crucial to analyze these elements thoroughly before committing. Here’s a guide to understanding the key “fingers in the property pie” and ensuring you’re making informed decisions.
Understanding the Property Pie
Investment properties often involve multiple parties with a stake in the transaction. From builders to salespeople and property managers, each plays a role in your purchase. I want you to know who is involved and their interests, which is essential to protecting your own.
Ask if the person selling you the property is working directly with the builder.
At Positive Income Properties, we have a mutually exclusive working relationship with the Enable Group in Victoria.
Some sales involve what is called ” An Aggregator.” What is an aggregator? That is a person or company that compiles a list of properties that they then supply that list to a channel of salespeople who then sell it to the client.What does this process add to the sale? It makes it easier for the sale person to deal with one supplier rather than arrange individual agreement with numerous builder across Australia.The amounts are sometimes breathtaking, ranging from $40,000 to over $100,000!! That is correct that an aggregator can increase the price you pay for your property by a very large amount.
PIP have over 50 individual working agreements covering numerous types of properties and all the states and territories.
Positive Income Properties works with the Enable Group as their sales and marketing department, and we work hand in hand with them while they deliver suitable land and great designs and build great buildings that are delivered on time. We have cooperated on over 60 properties in the last 18 months.
How do you identify if your sales agent is dealing directly with the builder ?
- Ask the salesperson; you may get the answer, but you may not.
- Look at the cost of the land. Is that the price you would pay if you went to the market to buy it? Did the salesperson try and negotiate a better price
- How much is the build? Work out the square metres of the build, divide by the cost and compare the cost per metre with other builds. Make sure you compare apples with apples and if there is a big difference in cost, ask why! (e.g) The standard build is $2500 per square metre for a 200 SQ build, and you are paying $3,100 per square metre, which can be you are paying $120,000 too much!
Please see the best way to buy and be successful and happy.
1. The Salesperson’s Role and Relationship with the Builder
Is the salesperson you’re dealing with working directly for the builder, or are they working through an Aggregator?? Understanding their relationship helps clarify potential conflicts of interest and ensures their advice aligns with your investment goals.
2. Land Costs and Negotiations
Have you scrutinised the cost of the land? Land value can significantly impact your investment’s profitability. Did the salesperson negotiate a better price on your behalf? If not, you might be leaving money on the table or paying that Aggregator.
3. Building Costs Per Square Metre
Knowing how much you’re paying per square metre for construction is another critical step. Compare this figure to industry averages. If it’s higher, you could be overpaying. Thorough research and negotiations can save you substantial costs. See the numbers above in (3)
4. Long-Term Support and Property Management
Will the company selling you the property support you throughout the process, from construction to tenant placement? A reputable seller should provide end-to-end assistance, including appointing a property manager and ensuring tenants are ready to occupy your investment. Some salespeople disappear once they are paid their commissions. PIP works with our clients to the handover and arranges the tenant recruitment and management.
5. Delivering Promised Returns
Finally, evaluate whether the property delivered the returns you were promised. If not, investigate the reasons behind the shortfall. Was it due to unforeseen market conditions, overestimation by the salesperson, or other factors such as you paid too much.
By addressing these considerations, you can ensure your investment property is a fruitful venture that maximizes returns and minimises risk. Always approach property investment with diligence and a clear understanding of all aspects of the transaction.
Gil Elliott is the Managing Director and Founder of Positive Income Properties. Gil has a rich background in business consulting and property investment. All of these he gained in his nearly four decades of experience in the real estate and marketing industries.
