How do we get the discounts we do? – Property Rant 018

Great question from Glenn in Southend – Discounts are the fascination of many an investor and in many ways discounts can be manufactured or mistaken, manipulated or just plainly deceived.

However, they are possible and as with all negotiation if you don’t ask you won’t get but here’s some of the main points that can turn a token discount that most developers build into the price into a substantial price differential because you are really creating a win-win for them.

Video Transcription 

Hey, guys. Property search... Think Gladfish. I'm Brett Alegre-Wood and this is Property Rant.

So today, question from Glen, "How do we get discounts?" Okay. So what we mean by discount, just if you don't know, if the developer's this price is that and they're selling for that you can go along and ask for a discount. So you go along and say, "Right. I want that property. How much are you going to give it to me for?" Or, "Can I buy it for, you know, 2%, 3%, 5%, 10%, 20% off?" And the developer will then make a decision or the sales agent will make a decision based on that and perhaps they'll go away and they'll think about it.

What we're able to as a business and our business model is, is we can get substantial discounts against what you as an individual can get. Now in some cases the developer may only need to sell one. So there's not really an advantage or much of an advantage there so the discount will be less that we'll be able to get. And look it varies with the market and a whole range of things. I'm not going to go into what affects the discounts and what sort of percentage discounts and all that in this. I just want to talk generally about how we get the discounts.

And look, the first one is, is really when we go in for residential property we go in and try get an off-plan. Now, owner occupiers they want to see, they want to touch, they want to feel what it's like to live there. So generally, once the plot or property is built or it's nearing completion or there's a show-home up, then owner occupiers will be able to move in and bid. But before that, the developer wants to get his funding secure.

So you know what they want to do is they want to sell to investors and normally that's investors who'll buy that. They'll buy at one price and the developer will put the price up incrementally over time until completion and then investments are made. So that's actually a really good strategy for off-plan. Works very well. But so, getting in early. Sales targets, you know, they may have to sell 10 units a month and they've only sold 5 units. They come along to someone like me and say, "Brett, would you like to buy five and I'll do this for you?" Okay. And then we negotiate it based on that. Also financial year end, they may have just, you know, been short of their target. "Here, can you do 20?" Or, "Can you buy block?" Or some developers will want to sell 40% of the properties off-market, off-plan before they begin building on site. Yeah, so they know they've got a viable site. So they come along to someone they know and say, "Hey, can we give you this block?" We take that block and then we sell if off to individual investors. At a hand's price. So that's the first thing.

Plus bulk-sales. Look, if we're going to come along and buy 20 we're going to get a better deal than you who wants to but 1 from a developer. All right. And that is, you know that is fundamentally a lot of what we do. There is a process. Because we have pre-vetted investors that we've already spoken to we know where the situation's at. Perhaps we've already got mortgage, you know, finance in place for them. They've spoken to a broker. So we know that once they're in they're in and they're going to go through to completion. All right. Plus things like, you know, we're not selling flipping because flipping is bad for a developer. It may be good for an investor but all of a sudden if you get people buying here and here and here and then the price ends up being here, and then all these people begin to flip here, the price drops and then their product is devalued.

From a value's point of view. Speed, okay. We can get things done a lot quicker because we've got professional solicitors, professional brokers, professional people who are used to doing this. Who have already read through the contracts once so they can, you know, if they already know one contract the contract is the same or very similar on every single apartment, let's say, then things can happen a lot quicker. So speed works in our favor as well.

But by far, I find the most important one of all besides all the other reasons there is for getting a discount is because of relationships. A lot of the developers that we work with we've been working with for many years. We've been going for over 12 years now and in that 12 years, all right, we've built up relationships. And so, for instance, with say, Barclay Group, every single month we're selling property for them. Every single year we're selling property for them. You know and that begins to add up over time to where the point where we're their first point of call when they need to shift stock. And you know that's a great relationship to have and that's the relationship what I call a "developer partner" where they when they need to shift some stock they come to us and say, "Brett, you know, can we get rid of this? Can we do this?" And they'll pick up the phone and say, "Hey, Brett, we've got some of these hanging around can we shift them?"

All right. And that's where we get the real benefits, the real discounts from. Plus there's obviously if the market's down, we've got ready investors who are educated as opposed to emotional. Most estate agents will have emotional investors but when the market's down they don't want to touch it. So there's a lot of benefits like that.

Okay, guys. Have a great day. Live with passion.

Brett Alegre-Wood
February 4, 2017

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