What’s the difference between opes and buying from a developer directly?

If you want to buy a New Build property as an investor, you have two options:

• You can either purchase directly from a developer – by contacting them via Trade Me or their website.
• Or you can purchase using a property investment company, like Opes Partners (that’s us).

This leads many investors who focus on New Builds to ask: “Why would I use a buyers’ agent like Opes Partners? Why not go to a developer directly?”

This is a great question and an important one too. The truth is using a property investment company isn’t always the right answer for everyone.

So, in this article, we’ll go through the five key differences between buying an investment property through a buyer's agent like Opes, compared with buying directly from a developer.

We’ll also go through the times when using a buyer's agent wouldn’t be the right fit, and when to go direct instead.

Difference #1 Not every property from each developer is appropriate for investment

Any property can be a rental property. But not every property can be a good investment property.

What do we mean by this?

Any property can be rented out. But, for it to be a successful investment, much more analysis is needed.

For example, here at Opes Partners, we currently recommend properties from 58 developers over a whole bunch of projects.

And even though each of these developers is trustworthy and can build a solid house … not every property they build will have the right investment fundamentals. And that means not every unit they build will be appropriate for investment.

What would make something not have the right fundamentals?

• If it’s too expensive for the rent the property will generate
• If the property is better geared for owner-occupiers
• If the property is over-specced for what tenants need
• If the property is in the wrong location for an investment
• If the property’s operating expenses (e.g. body corp) are too high, harming cashflow

Don’t get us wrong, they’ll build a good property. But that doesn’t make it a good investment. And being able to spot the difference is key for investors.

Here is a recent example of an excellent property, but a bad investment. This development of nine luxury, terraced homes, designed by an award-winning architect, are on the market from $2 million.

So what’s the difference if you use a buyers’ agent vs a developer?

If you choose to go to developers directly, then you’ve got to vet the developer, the property and the investment fundamentals yourself.

But a good investment-focussed buyers’ agent will recommend pre-vetted investment-grade stock from developers they’ve already checked out and likely worked with before.

This saves you time as an investor – since you don’t personally have to vet properties and developers.

It also means that you’re less likely to make a mistake. Because many investors will only evaluate a handful of properties in their time, whereas a property investment company is doing it daily.

Here at Opes Partners, we use our rigid 23-point checklist to determine if a property meets the grade.

So, the first reason some investors choose to work with a property investment company rather than a developer is the ability to determine whether a property is a good investment or not.

Difference #2 access to developments that aren’t on trade me, and developers you wouldn’t know about

When you’re searching for a New Build investment, you can gander through Trade Me, head to a real estate agent, or contact a developer’s sales team.

But it may surprise you to know not every developer sells properties via these routes.

There are lots of small developers out there who build good quality property and who don’t want to sell through these traditional means.

They work exclusively with companies like Opes to find investors to purchase their properties, usually because landlords are often able to purchase more quickly.

So an investor working with an investment company can usually access properties that aren’t marketed on Trade Me or by traditional means.

It’s important to note, property investment companies work with a range of developers across the country. This has two benefits for investors:

• It allows you to consider purchasing from a small developer that isn’t widely known. These developers might build quality investment properties, but haven’t built a national brand yet
• It encourages you to consider areas you might not otherwise have thought about. For example, you might never have heard about the small developer from Timaru, or you might never have looked twice at a development in Ashburton.

Difference #3 ongoing planning service

Developers are experts at building properties. They don’t specialise in providing financial advice.

So a big point of difference for investors who choose to work with a property investment company is the financial advice on offer.

This means not just choosing the right property, but building a portfolio to help the investor achieve their long-term goals.

For instance, here at Opes we use our inhouse software, MyWealth Plan, to figure out:

• Where investors want to be financially in the future
• Where they’re projected to be based on what they’re doing right now
• And then, if there is a gap, how to close it through investment property.

This, along with planning how each property will be used to further build a portfolio, is the difference between purchasing from a developer and through a property investment company.

A property investment company will also help you regularly review your plan and help you grow your portfolio.

Difference #4 guiding investors through due diligence

When you use a property investment company to purchase a new-build, they will often have a set process you can follow during Due Diligence.

Remember, this is the time where you have signed a contract for a property … but you aren’t yet committed to purchasing it. So you’ve got 10 days to confirm whether it’s the right property for you.

A property investment company’s process will often be more thorough than a developer.

For instance, a developer will encourage you to talk to a mortgage broker so you can get finance. And it will be compulsory to talk to a lawyer so you can get the contract over the line.

However, a property investment company will also encourage you to:

• Speak to a specialist property accountant to see how to own the property e.g. trust vs company
• Speak to a property management company to make sure the property can be rented out
• Speak to an insurance broker to make sure getting cover won’t be an issue.

Here's an example of our due diligence process here at Opes Partners:

Buyer’s agents will often organise these conversations for you with trusted professionals to save time and make sure the advice is sound.

Don’t get us wrong, a developer’s team will be helpful, but their focus is more on the property, rather than how the property works as an investment.

Difference #5 scale and ongoing relationship

Building properties is complicated. So, sometimes things can go wrong.

A developer might guarantee that a property will meet Healthy Homes standards – a legal requirement for landlords. But then once the inspection has been completed, perhaps the property fails the standards.

It’s at this point that a property investment company will often show its value.

This is because one property investment company might represent a large number of buyers within a project, giving the property investment company more scale and clout with the developer.

An investment-focussed buyers’ agent will have the developer’s ear and be able to step in to sort our problems as they arise.

Some common instances where that might happen:

• If the building specs are changed from those agreed
• If a lower quality material is used within the build, compared with agreement
• If the developer won’t let a property manager through to find tenants for the property prior to settlement
• If the developer attempts to increase the price

Could you sort all this out yourself? Yes, of course, but it’s always nice to have someone on your team who does this full-time, and has a lot of extra bargaining power when you really need it.

When should I go to a developer directly?

Now, there are situations where going to a developer direct may be a better option for you or your situation.

Let’s go through three key examples.

1) If you want to purchase a very specific property

Firstly, no single property investment company represents every developer in the country.

So, if you have one specific property you are interested in – and it’s from a developer or in a town the property investment company doesn’t represent – going direct may be the better option.

For instance, right now at Opes Partners we do not recommend any properties in Dunedin, Gisborne, Hawke’s Bay or Wellington.

The reason for that is we believe these regions are at poor parts of their property cycle.

But if you have a different view of the market and want to purchase properties in these regions then you are likely to need to purchase from the developer directly.

For full transparency, here is a map of every area we've ever recommended a property in, here at Opes Partners. If you want to buy a New Build outside these areas – then going direct to a developer may be a better option.

2) If you are purchasing an owner-occupier home

The most common time that purchasers will buy from a developer directly is if they are purchasing a home for them to personally live in.

In this instance, buyers don’t care about a hard-nosed look at the numbers and instead want to walk through a house and see whether they’d like to live there.

That’s where approaching a developer directly is a much more natural fit.

3) If you want to hire a developer to build you a property

Another common instance, where investors should go direct, is if you already have a piece of land and want the developer to build on that land.

Property investment companies are more focused on helping investors purchase turnkey/off-the-plans properties from a developer. They tend to be less focused on helping investors build properties for themselves.

So in this case it’s better to go to a developer directly.

Just be aware that not every developer is available to build property on other people’s land.

For instance, developers like Golden Homes, Stonewood, Mike Greer and GJ Gardner are all available for you to hire to build a property ‘on your own bit of dirt’.

On the other hand, companies like Williams Corporation, Safari Group and Wolfbrook will only build properties on land they are contracting to purchase. So you can’t hire them to build on your land.

Can I get it cheaper if I go direct?

Now we can’t speak for all property investment companies, but here at Opes all the properties we recommend come with fixed prices. They are pre-negotiated and the haggling has already been done.

So, a common – and fair – question investors often ask is whether they can get a property cheaper if they go direct to a developer.

The answer is “no”. That’s for 2 reasons:

• Often, because we’re acting exclusively for a developer, you may not be able to purchase the property from them. This is especially true for smaller developers who don’t have an internal sales team
• But, most importantly, we want to make sure nobody gets a better deal than the investors we work with. So if we found out a developer was giving better deals elsewhere, we would go back and renegotiate.

So when should I use a property investment company? and when should I go direct?

The decision about whether to use a property investment company or go direct to a developer depends on your situation.

If you have a very specific area or property in mind; want to contract a developer to build on a piece of you own land; or are purchasing to live in yourself – then approaching a developer direct may be the right decision for you.

However, if you want to purchase a property as an investor, and want advice about where to purchase, what to purchase, and which developers are quality, then working with a property investment company – like Opes Partners – may be a better fit.