Are the properties Opes recommends more expensive?

As a money-savvy investor you probably want to hunt down the best price for a property you want to buy.

So, when thinking about working with an investment company, like Opes Partners, investors often ponder one of two things:

• Could I get this property cheaper if I go straight to the developer?
• Since this company works with developers all the time, they will get me a cheaper price?

The surprising answer to both of this is “no”.

That probably raises a few eyebrows, so in this article you’ll learn why properties can sometimes appear to be more expensive when bought through a property coaching company like Opes.

Does Opes get the cheaper price for properties?

A lot of people ask whether Opes or other property investment companies can find properties more cheaply than if they looked for the properties themselves.

They also think that since Opes works with a lot of developers, we can negotiate lower prices. That’s not the case.

The simple answer is: No, this is not the case.

The price isn’t cheaper than you could otherwise find. It will be the same price as you could otherwise get.

This is because we negotiate that developers won’t sell their properties for less money than our investors pay.

So while it will be the best/cheapest deal you could get, it won’t be cheaper.

Why doesn’t Opes negotiate cheaper prices?

Investors often think they need to buy a property at the cheapest price. It’s not about getting the cheapest price. It’s about getting the fairest price.

In our mind the price you want to pay for your investment property is:

• A price that enables the developer to build a good quality property
• A price that is in line with its current value
• A price that stacks up compared to the rental assessment, so that the property is a solid investment.

You don’t want to grind down your developer so far that they can’t deliver. And if you do only aim to get the cheapest of the cheap, that’s where you can run into trouble.

For instance, a developer who needs to make a sale at any price may not end up finishing the development. Alternatively, if you grind down the price continually, the quality of finishing may be compromised.

Instead, investors should think about this like purchasing shares through a stockbroker.

Let’s say you want to buy shares, so you go to a broker.

Brokers work with shares day-in, day-out. Are they going to be able to negotiate down a cheaper share price?

No. The share price is the share price. But what they can do is analyse the stock to figure out if it is worth investing in for the long term.

That’s a good analogy for how Opes works.

Are the properties Opes recommends more expensive?

The flip-side of that is when investors ask whether the properties we recommend are more expensive than they could get through a developer.

We don’t charge a fee to investors who use our service. Instead, we charge the developer a fee when an investor decides they want to invest in a specific property.

So investors ask whether our fee is added on to the property’s price … and whether the property would be cheaper if they went to the developer direct.

Here again, the answer is no.

The reason is that no matter what, the developer has to pay a fee when they sell a property. That’s whether they use us, a real estate agent, or even if they sell the property themselves through their own team. There are always costs associated.

These transaction costs are baked in to the purchase price no matter where the developer sells their properties and no matter where investors purchase their properties.

But, to make sure our investors are getting the best deal on the market we do negotiate with developers to ensure they don’t give a better deal to other purchasers.

This is because if they were to give a better deal to someone else, we want our investors to get that same good deal.

But, why are properties cheaper on the developer’s website?

If you compare price tags you may find the price Opes puts forward is higher than what you can find on the developer’s website or on TradeMe.

Why? Well, it’s pretty standard practice that when a developer advertises a property they’ll advertise the bare minimum property package. That means a few essential things you need as an investor are excluded.

So, you might see a property advertised for $699K, and you might think – “Opes showed me a property for $725k!”

Often that lower price of $699k might exclude driveways, landscaping, appliances, or even curtains.

Once you add all of these things on, that’s how you get to the $725k price.

It’s a bit like a car company advertising a car for a cheap price, then later you discover you need to pay extra for the tyres to be put on.

So when you see a developer advertising “properties from $[insert surprisingly cheap price here]”, don’t get prematurely too excited because it probably isn’t the deal of the century.

Ultimately, you want to make sure your final product has all these things to make it suitable for a tenant move in immediately.

For example, common things left out of a standard package are:

1) Drapes and blinds

This is the No.1 item left off the list. It may not seem like all that big a deal, but you would usually be looking at an extra $5000 (minimum) cost.

2) Heat pump

Under the Healthy Homes Act, properties need to have heating built in. Generally, it’s expected to be a heat pump. Often these will be left out of the base-level package you see advertised.

3) Landscaping

This isn’t just grass, it’s the whole kit and caboodle. Landscaping includes things like a letterbox, clothesline and a driveway.

All of these things tend to add up. When a property investment company puts a property in front of you, that’s the price for the all-inclusive, tenant-ready property. Not the base-level package.

This is why, even though a property appears to be more expensive, it’s really just more accurate.

Do developers ever ask Opes: “you can charge a fee but you’ve got to add it on top?”

Sure, sometimes developers do ask us to recommend their property and add our fee on top.

We tell them no.

The reason behind this is that if you had the option of buying a property through us vs a developer … and the developer was cheaper, it would be our legal and fiduciary duty to tell you that and recommend you see the developer.

This is why we tend to work with larger developers who recognise that whether they use us or someone else, they’re always going to pay some sort of fee.

And we also tend to work with smaller developers who don’t want to hire a big sales team. They want us to find investors for their properties while they focus on building good quality housing.

So it’s the same price? No more, no less?

At the end of the day, every single property transaction in the country (bar private sales) comes with a transaction fee.

Property ads are often misleading. It might seem like you, the investor, can nab a cheaper house and land package online, but it might be literally just that - house and land.

So why would someone use a property investment company like Opes, rather than going to the developer directly? Ultimately, you’re going to pay the same price, but using a property investment company includes the professional support and guidance from a professional when something goes wrong.

… and you can be guaranteed your property comes with the letterbox and everything else you need for the property to be tenant-ready.

Bottom line is it’s not a good idea to try and get the cheapest deal, only to get no deal at all.